MASTER MERIAL VENTURE AGREEMENT

Exhibit 10.4

EXECUTION COPY

Confidential portions of this exhibit have been omitted and filed separately with the Securities and Exchange Commission with a request for confidential treatment pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended. The location of an omitted portion is indicated by an asterisk within brackets (“[*]”).

MASTER MERIAL VENTURE AGREEMENT

DATED as of May 23, 1997, BY AND AMONG:

RHÔNE-POULENC S.A., a société anonyme organized under the laws of France (“Rhône-Poulenc”),

INSTITUT MÉRIEUX S.A., a société anonyme organized under the laws of France (“IM”),

RHÔNE-MÉRIEUX S.A., a société anonyme organized under the laws of France (“RM”),

MERCK & CO., INC., a corporation organized under the laws of the state of New Jersey (“Merck & Co.”),

MERCK SH INC., a corporation organized under the laws of the state of Delaware (“Merck SH”), and

MERIAL LIMITED, an English private company limited by shares (and, after the domestication contemplated by Section 1.3(a)(B), also a Delaware limited liability company) (“Merial”).

RECITALS

     WHEREAS, both the RP Group and the Merck Group are engaged, among other activities, in the research and development, manufacturing, marketing and sale of Animal Health Products and of Poultry Genetics Products throughout the world;

     WHEREAS, RP and Merck wish to combine their respective Animal Health Businesses and Poultry Genetics Businesses into a worldwide venture owned and controlled 50% by each of them and IM has created Merial as the parent company of the group of companies which will conduct these businesses;

     WHEREAS, IM will contribute the entirety of RM’s share capital to Merial on or prior to the Closing Date;

     WHEREAS, RP, Merck, and certain of their respective Subsidiaries, on the one hand, and RM or an RM Subsidiary or Merial, on the other hand, have entered into or will, prior to or concurrently with the Closing, enter into the Ancillary Agreements, including research and development, manufacturing and supply, license and various other agreements to enable the Merial Venture to conduct these combined activities;

     WHEREAS, the terms and conditions of this Agreement and the Ancillary Agreements do not limit Merial’s (and Merial has) full independence and commercial autonomy, such terms and conditions not being intended to limit Merial’s independence and commercial autonomy in marketing, selling, negotiating and determining customers and resale prices for Animal Health Products and Poultry Genetics Products.

     WHEREAS, prior to or at the Closing, pursuant to the terms of this Agreement and the applicable Ancillary Agreements, the Parties will take further steps to implement the Merial Venture, including the domestication of Merial as a limited liability company in the State of Delaware, and the transfer (by merger or otherwise) to Merial and/or its Subsidiaries of the entirety of the Merck Contributed Assets; and

     WHEREAS, upon completion of the Transactions at the Closing, the Merial Venture will commence the Merial Venture Business and IM and (subject to Section 5.1(a)(iii)) Merck SH will each hold a 50% ownership interest in Merial;

     NOW, THEREFORE, in consideration of the respective representations and covenants of the Parties as set forth below, the Parties agree as follows:

ARTICLE I

OBJECTIVES AND STRATEGIES, BUSINESS SCOPE
AND OVERVIEW OF TRANSACTION

SECTION 1.1. Objectives and Strategies

     The Merial Venture is being formed with the following objectives and strategies:

     (a) The principal objective of the Merial Venture is to combine, on the terms and conditions of this Agreement and the Ancillary Agreements, the complementary strengths of the RP Group and the Merck Group to create a global leader in the Animal Health Business and Poultry Genetics Business industries, committed to satisfying the needs of its customers, employees and members worldwide. Within the Merial Venture, the Animal Health Business and the Poultry Genetics Business will maintain their own identity and organization.

     (b) While maintaining close links with both Groups, the Merial Venture will function as a self-contained independent entity with a single globally responsible management and will establish its own unique identity and culture, built on the best available talents and practices.

     (c) In the Animal Health Business, the Merial Venture will, with the support of the research and development capacities of the two Groups and/or other persons party to the Ancillary Agreements (on the terms and conditions of this Agreement and the

Ancillary Agreements), have a unique blend of biological and pharmaceutical expertise that will enable it to respond more effectively to new threats to animal health as they arise. In cooperation with both Groups, which are expected to remain important sources of new compounds and technologies, the objective of the Merial Venture will be to discover and develop a broad range of innovative pharmaceutical and biological Animal Health Products.

     (d) The Merial Venture will offer a broad differentiated line of Animal Health Products and related services in markets around the world. It will target those markets where products for the prevention and treatment of animal diseases provide the economic opportunity to sustain innovation and yield sufficient return on investment. The Merial Venture will distribute its products in a manner which best meets the strategic needs of each market.

     (e) The Merial Venture will maintain its position as a global leader through continued investment in new markets, technologies, people and facilities with the objective, among other things, of delivering the highest quality products in the most cost efficient manner.

     (f) In the Poultry Genetics Business, the Merial Venture will be the leader in the development and production of poultry breeding stock providing full service to the chicken, turkey and egg market segments.

     (g) The rights, powers, obligations and duties of the Parties with respect to the Merial Venture are only those set forth in this Agreement (other than this Section 1.1), the Ancillary Agreements, the Association Documents and the LLC Agreement, each as amended from time to time, and any Future Agreements.

SECTION 1.2. Business Scope

     (a) The business activities to be conducted by the Merial Venture (the “Merial Venture Business”) will include:

     (b) “Animal Health Products” are defined to include all pharmaceutical, biological and medicinal, including in-feed, products intended to enhance the health or performance of any and all species of animals (including livestock and companion animals but excluding humans), but to exclude (i) any products with a different intended utility, (ii) nutritional additives, (iii) chemical intermediates, and (iv) the inhalational anaesthetics Isoflurane, Halothane, Sevoflurane and Desflurane.

     (c) “Poultry Genetics Products” are defined to include all products developed using genetic techniques (including selective breeding) to improve poultry, whether for meat production, egg production or any other purpose. Such products are commonly, but not exclusively, sold in the form of hatching eggs or day-old poultry. For the purposes of this definition, “poultry” includes chickens, turkeys, ducks, geese, guinea fowl, pheasants, partridges and quail.

     (d) Merial shall, and shall cause each Merial Venture Company, to use or sell all bulk materials or products supplied by the Merck Group or the RP Group only in the Merial Venture Business.

SECTION 1.3. Overview of Transaction

     The Parties intend to create a viable, independent entity, capable of successfully competing globally in the Merial Venture Business industries. To that end, and upon the terms and conditions set forth herein and in the Ancillary Agreements:

      (a)  Formation of Merial

     Merial has been formed as an English private company limited by shares for the purpose of conducting the Merial Venture Business. On the date hereof Merial is wholly owned by IM and Rhône-Poulenc Finance S.A., a wholly owned Subsidiary of RP (“RP Finance”), with IM owning one million shares of Merial and RP Finance holding one share of Merial as nominee for IM. Merck SH has been created as a Delaware corporation, and is wholly owned by Merck and Company Incorporated (“MACI”).

     (i) On or prior to the Closing Date, the Parties shall cause the following corporate actions to be taken:

     (A) IM shall (w) form a single member Delaware limited liability company (“IM LLC”) which satisfies the statutory requirements under French law to be a shareholder of a société par actions simplifiée (“SAS”), including the requirement that IM LLC have a share capital of at least the equivalent of FF 1,500,000; (x) sell one of IM’s shares of RM to IM LLC and contribute the remainder of IM’s shares of RM to Merial; (y) cause RM to be converted into a SAS with Merial and IM LLC as its shareholders; and (z) sell (without any net profit to IM from all of the transactions contemplated by this clause (A)) the entirety of its ownership interest in IM LLC to Merial for an amount in cash equal to the fair market value of such ownership interest (equal to the cash held by IM LLC and the cash value of one share of RM);

     (B) Merck shall (u) cause Merck SH and MACI to form a Delaware limited liability company (“Merck Transitory LLC”) owned 99% by Merck SH and 1% by MACI; (v) cause Merck Holdings, Inc. to contribute the entirety of its share capital in Hubbard Farms, Inc. to MACI; (w) cause MACI to contribute the entirety of the share capital of Hubbard Farms, Inc. to Merck SH; (x) cause Hubbard Farms, Inc. to be converted into Hubbard Farms LLC, a Delaware limited liability company;

(y) cause Merck SH to contribute its interest in Hubbard Farms LLC to Merck Transitory LLC; and (z) cause Hubbard Farms LLC to be merged with Merck Transitory LLC, with Merck Transitory LLC being the surviving company; and

     (C) Merck shall, in accordance with Section 5.1(a)(i), transfer (or cause to be transferred) the remainder of the Merck Contributed U.S. Assets (other than the limited liability company interests in Hubbard Farms LLC) to MACI (except to the extent MACI already holds any such assets), and shall cause MACI to transfer all of the Merck Contributed U.S. Assets (other than the limited liability company interests in Hubbard Farms LLC) to Merck SH, which will in turn transfer them to Merck Transitory LLC.

     (ii) On the Closing Date, the following steps shall be taken:

     (A) Meetings of the members and directors of Merial at such time shall take place (v) to amend the memorandum of association and articles of association of Merial so as to adopt a memorandum of association and articles of association in the form (with certain provisions thereof to be completed prior to Closing as indicated therein, it being understood that to the extent there are any inconsistencies between the attached form and the provisions of this Agreement, the attached form shall be modified to be consistent herewith) provided as Exhibit I hereto (the “Memorandum of Association” and the “Articles of Association”, respectively), (w) to approve the domestication of Merial as a limited liability company in the State of Delaware, (x) to approve and execute the limited liability company agreement of Merial in the form provided as Exhibit II hereto, (y) to approve the merger of Merck Transitory LLC with and into Merial, and (z) to approve the transfer by RP Finance of its one share to IM, the increase in the authorized share capital of Merial, the redesignation of the shares owned by IM as B Ordinary Shares and the issuance of one million and one A Ordinary Shares to Merck SH in

consideration for its agreement to transfer the Merck Contributed Assets to Merial, each such class of Merial shares to be governed by the provisions of the Association Documents, with the effect that, after all such actions are taken, each Principal shall own, directly or indirectly, exactly the same number of Ordinary Shares of Merial and have exactly the same general ownership interest in Merial except for the differences between A Ordinary Shares and B Ordinary Shares as set forth in the Association Documents;

     (B) Merial shall be domesticated as a limited liability company in the State of Delaware; and

     (C) Merck Transitory LLC shall merge with and into Merial in accordance with Delaware Law, with Merial being the survivor company (such that Merial shall own all of the assets, and be subject to all of the Liabilities, of Merck Transitory LLC, Merck Transitory LLC thereupon ceasing to exist).

(b) Ancillary Agreements

     (i) The following Ancillary Agreements are being entered into concurrently herewith, and are conditional upon, and shall come into effect as of, the Closing:

     (A) The Supply Agreement between Merck and Merial, provided as Exhibit III hereto (the “Merck Supply Agreement”).

     (B) The Research and Future Products License Agreement between Merck, Merial and RM, provided as Exhibit IV hereto (the “Merck Research Agreement”).

     (C) The Existing Products License Agreement between Merck and Merial, provided as Exhibit V hereto (the “Merck License Agreement”).

     (D) The Supply Agreement between Merial and Rhône-Poulenc Agrochimie S.A., provided as Exhibit VI hereto (the “RP Ag Supply Agreement”).

     (E) The Research and Future Products License Agreement between Merial and Rhône-Poulenc Agrochimie S.A., provided as Exhibit VII hereto (the “RP Ag Research Agreement”).

     (F) The Fipronil and Existing Products License Agreement between Merial and Rhône-Poulenc Agrochimie S.A., provided as Exhibit VIII hereto (the “RP Ag Licence Agreement”).

     (G) The Research and License Agreement between Merial and Rhône-Poulenc Rorer Inc., provided as Exhibit IX hereto (the “RPR Research Agreement”).

     (H) The Research and License Agreement between Merial and Pasteur Mérieux Sérums et Vaccins S.A., provided as Exhibit X hereto the “PMSV Research Agreement”).

     (ii) The following Ancillary Agreements shall be negotiated and executed prior to or at the Closing:

     (A) The RP Transfer Agreement among Merial, RP and IM, to implement the transactions involving the contribution of RM and its Subsidiaries and assumption of the RM Contributed Liabilities on the terms and conditions specified in this Agreement (the “RP Transfer Agreement”).

     (B) The Merck Transfer Agreement among Merial, Merck, MACI, Merck Transitory LLC and Merck SH, to implement the transactions involving the contribution of the Merck Contributed Assets and assumption of the Merck Contributed Liabilities on the terms and conditions specified in this Agreement (the “Merck Transfer Agreement”).

     (C) The Avermectin and Existing Products Sublicense Agreement between Merial and RM.

     (D) The Merck Trademark (Dual Use) License Agreement between Merck and Merial, a form of which is provided as Exhibit XI hereto.

     (E) The Fipronil Sublicense Agreement between Merial and RM.

     (F) The Merck Transition Services Agreement between Merck and Merial, consistent with the provisions set forth in Section 11.8(b) of this Agreement.

     (G) The RP Transition Services Agreement between RP and Merial, consistent with the provisions set forth in Section 11.8(b) of this Agreement.

     (H) The Merck Employee Leasing Agreement, substantially in the form provided as Exhibit XII hereto.

     (c)  Contribution of Merck Contributed Non-U.S. Assets . Merck shall, in accordance with Sections 5.1 (a)(ii) and 5.2(a) and the Merck Transfer Agreement, contribute enough cash to Merial , and/or accept (or cause its Subsidiaries to accept) a promissory note or notes issued by Merial or that Merial Venture Company that is purchasing such assets (which promissory notes constitute part or all of the Debt that Merck is to contribute to the Merial Venture), to enable Merial or an appropriate Merial

Subsidiary to purchase each of the Merck Contributed Non-U.S. Assets in accordance with Section 5.1(a)(ii). The Principals may also agree, based on relevant criteria including tax-efficiency, on another method to transfer certain Merck Non-U.S. Contributed Assets to the Merial Venture, which method may involve the creation of a new direct or indirect wholly-owned Subsidiary of Merial which shall purchase such assets or the transfer or merger of one or more Subsidiaries of Merck to or with Merial or one of its Subsidiaries. In the absence of such agreement in writing, but subject to Section 5.4, the foregoing provisions of this Section 1.3(c) shall apply.

     (d) Each Party’s obligation to take any of the actions contemplated by this Section 1.3 to occur on or prior to the Closing Date is conditioned upon contemporaneous completion of all such actions no later than the Closing Date.

ARTICLE II

DEFINITIONS

     As used in this Agreement, capitalized terms have the meanings set forth below:

     “Action” means any claim, action, suit, arbitration, inquiry, proceeding or investigation by or before any Public Authority.

     “Affiliate” means, with respect to any Person, (i) a Person which is a Subsidiary of such Person, (ii) a Person of which such Person is a Subsidiary, or (iii) any other Person which is a Subsidiary of a third Person of which such Person is also a Subsidiary.

     “Ancillary Agreements” means, collectively, the agreements referred to (and as each is defined in) Section 1.3(b).

     “Animal Health Business” has the meaning set forth in Section 1.2(a).

     “Animal Health Products” has the meaning set forth in Section 1.2(b).

     “Association Documents” means, collectively, the Memorandum of Association and the Articles of Association, each as defined in Section 1.3(a)(ii)(A), as the same may be amended, modified, supplemented or restated from time to time.

     “Avermectin Products” means all those Merial Venture Products containing one of the Avermectin class of compounds, including, but not limited to, products containing abamectin, ivermectin, eprinomectin or emamectin.

     “Benefit Plan” means each plan, program, policy, payroll practice, contract, agreement or other arrangement (including plans maintained both inside and outside of the U.S. and excluding Governmental Plans) providing for compensation, severance (including termination indemnities, long service leave obligations and similar obligations), termination pay, performance awards, stock or stock-related awards, fringe benefits or

other employee benefits of any kind, whether formal or informal, funded or unfunded, written or oral and whether or not legally binding, including, without limitation, each “employee benefit plan,” within the meaning of Section 3(3) of ERISA and each “multi-employer plan” within the meaning of Sections 3(37) or 4001(a)(3) of ERISA.

     “Biological Products” means all RM Existing or Pipeline Products (other than diagnostic products, including the products included in the Diagnostic Disposal) that are vaccines, whether preventive or therapeutic, as well as any immunological products (except the GnRH vaccine), together with electronic identification products and vaccinating equipment, including injectors and sprayers.

     “Board of Directors” has the meaning set forth in Section 4.3(a).

     “Business Day” means any day which is not a bank holiday in any of London, New York or Paris.

     “Business Plan” has the meaning set forth in Section 4.4(c).

      “Central Biologics” has the meaning set forth in Section 5.1(b)(iii).

     “CEO” has the meaning set forth in Section 4.4(e).

     “CFM Agreement” shall refer to the Consolidation Fiscale Mondiale or worldwide tax consolidation agreement, dated February 7, 1994, between RP and the French Taxing Authority, as the same may be supplemented, amended, modified or restated from time to time, or any successor agreement thereto.

     “Change of Control” means, with respect to either RP or Merck, the acquisition by any Person or Group, directly or indirectly, beneficially or of record, of shares or options or other rights to purchase shares representing in the aggregate more than fifty percent (50%) of the aggregate ordinary voting power represented by the issued and outstanding capital stock of RP or Merck, as the case may be. Notwithstanding the

foregoing, the following transactions shall be deemed not to constitute a Change of Control: any merger or other business combination with another entity (x) solely to reincorporate RP or Merck, as the case may be, in a different form or under the laws of a different jurisdiction, (y) in connection with an internal reorganization which results in RP or Merck, as the case may be, being a direct or indirect wholly-owned Subsidiary of such entity or (z) any other transaction or series of transactions which results in RP or Merck, as the case may be, being a direct or indirect wholly-owned Subsidiary of any such entity, only if in the case of clauses (x), (y) or (z): the shareholders of RP or Merck, as applicable, immediately prior to the consummation of such transaction(s) own, in the aggregate, immediately after such transaction(s), shares representing more than fifty percent (50%) of the aggregate ordinary voting power represented by the issued and outstanding capital stock of such entity (or any parent company thereof). A “Successor Entity” means any entity which satisfies the conditions set out in any of clauses (x), (y) or (z) of the preceding sentence and which has executed a deed in the form of Exhibit XIII under which it agrees to be bound by the obligations of that party in respect of which it is a Successor Entity. Following any transaction(s) referred to in such clauses (x), (y) or (z), all references to RP or Merck shall be deemed to refer to the applicable Successor Entity, including the references in clauses (x), (y) or (z). For purposes of this definition only, “Group” means two or more Persons who agree to act together for the purpose of acquiring, holding, voting or disposing of equity securities of an issuer.

     “Closing” means the completion of the merger of Merck Transitory LLC with and into Merial.

     “Closing Date” has the meaning set forth in Section 12.3.

     “Closing Meeting” means the meetings of Merial’s members or board of directors, as appropriate, held on the Closing Date.

     “Code” means the Internal Revenue Code of 1986, as amended and any regulations promulgated or proposed thereunder.

     “Combination” means any Animal Health Product that contains more than one active ingredient.

     “Companies Act” means the United Kingdom Companies Act of 1985.

     “Control,” whether used as a noun or verb, refers to the possession, directly or indirectly, of the power to direct, or cause the direction of, the management or policies of a Person, whether through the ownership of voting securities, by contract or otherwise.

     “Damages” means any liability (whether arising out of fault, strict liability or otherwise), obligation, loss, fine, damage, judgment, arbitration award, settlement amount, penalty, claim, or Environmental Liability, and all reasonable costs and expenses related thereto (including reasonable costs of investigation, fees and expenses payable to outside counsel, independent accountants and similar professional advisors or consultants, but not including any corporate allocation for management time or for the use of similar in-house services or facilities), in each case whether or not incurred in connection with a Third Party Claim.

     “Debt” has the meaning set forth in Section 5.1(c).

      “Delaware Act” means the Delaware Limited Liability Company Act, 6 Del. C. § 18-101, et seq ., as amended from time to time, including, without limitation, any amendments to Section 18-109 thereof.

     “Delayed Purchase Assets” has the meaning set forth in Section 5.1(a)(ii)(A)(4).

     “Diagnostic Disposal” means the contemplated sale by RM of its diagnostic product business.

     “Director” has the meaning set forth in Section 4.3(b).

     “Dissolution” or “Dissolve” or “Dissolved”, as applied to the Merial Venture, means either (i) the sale of the Merial Venture Interest of one Principal to the other Principal pursuant to Sections 16.3, 16.4, 16.5, 17.2(c)(ii) or otherwise or (ii) the sale of all or substantially all of the Merial Venture to a Third Party pursuant to Sections 16.3, 16.4, 17.2(c)(i) or otherwise.

     “Dissolution Date” has the meaning set forth in Section 16.6(a).

     “Distributable Profits” has the meaning set forth in Section 181 of the Companies Act.

     “Economic Effective Date” has the meaning set forth in Section 6.3(a).

     “Encumbrance” means any lien, privilege, mortgage, pledge, third-party claim or right, charge, restriction of use, defect of title, easement, security interest or encumbrance of any kind, including, without limitation, obligations resulting from any sublease, tenancy, right of occupation, easement, preemptive right or privilege in favor of any person or entity.

     “Environmental Laws” means, at any date, all provisions of law (including applicable principles of common and civil law), statutes, ordinances, rules, regulations, published standards and directives that have the force and effect of Laws, permits, licenses, judgments, writs, injunctions, decrees and orders enacted, promulgated or issued by any Public Authority, and all indemnity agreements and other contractual obligations, as in effect at such date, relating to (i) the protection of the environment, including the air, surface and subsurface soils, surface waters, groundwaters and natural resources, and (ii) occupational health and safety and exposure of persons to Hazardous Materials. Environmental Laws shall include the Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C. §§ 9601 et seq ., and any other Laws imposing or creating liability with respect to Hazardous Materials.

     “Environmental Liability” means any liabilities, obligations, costs, losses, payments or damages, including compensatory and punitive damages, incurred (i) to contain, remove, clean up, assess, abate or otherwise remedy any actual or alleged release or threatened release of Hazardous Materials, any actual or alleged contamination (by Hazardous Materials) of air, surface or subsurface soil, groundwater or surface water, or any personal injury or damage to natural resources or property resulting from any such release or contamination, pursuant to the requirements of any Environmental Law or in response to any claim by any Public Authority or other Third Party under any Environmental Law; (ii) to modify facilities or processes or take any other remedial action in response to any claim by any Public Authority of non-compliance with any Environmental Law; (iii) as a result of the imposition of any civil or criminal fine or penalty by any Public Authority for the violation or alleged violation of any Environmental Law; or (iv) as a result of any action, suit, proceeding or claim by any Third Party under any Environmental Law. The term “Environmental Liability” shall include: (i) reasonable fees of counsel and consultants (but not any corporate allocation for management time or for the use of similar in-house services or facilities) and (ii) the costs and expenses of any investigation undertaken to ascertain the existence or extent of any potential or actual Environmental Liability.

     “ERISA” means the Employee Retirement Income Security Act of 1974, as amended and any regulations promulgated or proposed thereunder.

     “Event of Insolvency,” with respect to any person, shall occur when either:

     (i) such person shall (A) voluntarily commence any proceeding or file any petition seeking relief under Title 11 of the United States Code, French Law No. 84-148 of March 1, 1984, French Law No. 85-98 of January 25, 1985 or any other bankruptcy, insolvency or similar law of the United States, any state thereof, or France, (B) apply for or consent to the appointment of a receiver, trustee, custodian, sequestrator, conciliator, administrator or similar official for it or a substantial part of its property, (C) file an answer admitting the material allegations of a petition filed against or in respect of it in any such proceeding,

(D) make a general assignment for the benefit of creditors, (E) become unable generally, or admit in writing its inability, to pay its debts as they become due, or (F) take corporate action for the purpose of effecting any of the foregoing; or

     (ii) an involuntary proceeding shall be commenced or any involuntary petition shall be filed in a court of competent jurisdiction seeking (A) relief in respect of such person, or of a substantial part of such person’s property, under Title 11 of the United States Code, French Law No. 84-148 of March 1, 1984, French Law No. 85-98 of January 25, 1985 or any other bankruptcy, insolvency or similar law of the United States, any state thereof, or France, (B) the appointment of a receiver, trustee, custodian, sequestrator, conciliator, administrator or similar official for such person or for a substantial part of such person’s property or (C) the winding-up or liquidation of such person; and such proceeding or petition shall continue undismissed for sixty (60) days or an order or decree approving or ordering any of the foregoing shall continue unstayed and in effect for thirty (30) days;

     (iii) an order is made by a court of competent jurisdiction, or a resolution is passed, for the winding up, dissolution or administration of such person or the appointment of a liquidator, manager, receiver, administrator, trustee or other similar officer in respect of, or an encumbrancer taking possession of or selling, any substantial assets of such person, or such person makes any arrangement or composition with, or any assignment for the benefit of, its creditors, or makes an application to a court of competent jurisdiction for protection from its creditors generally, and such order, resolution, appointment, arrangement, assignment or application is not withdrawn or cancelled within sixty (60) days of its being made.

     (iv) anything analogous to any of the events specified in (i), (ii) and (iii) above occurs in respect of such person under the laws of any applicable jurisdiction.

     “Executive Chairman” has the meaning set forth in Section 4.4(a).

     “Executive Officers” has the meaning set forth in Section 4.4(d).

     “Existing Other JVs” means (a) with respect to RP, those Persons set forth on Schedule 2-2 and (b) with respect to Merck, those Persons set forth on Schedule 2-3, in either case only so long as such Persons are Other JVs.

     “Existing Product” means each Animal Health Product or Poultry Genetics Product that is marketed in any country on the date of this Agreement, by RM or its Subsidiaries (including those set forth in Schedule 2-4) or by the Merck Group (including those set forth in Schedule 2-5).

     “Fipronil Products” means all those Merial Venture Products containing Fipronil as an active ingredient.

     “Fiscal Year” has the meaning set forth in Section 11.4.

     “Future Agreement” means any written agreement (other than an Ancillary Agreement) between any RP Company or Merck Company, on the one hand, and any one or more of the Merial Venture Companies, on the other hand, which may be entered into at any time after the Closing.

     “Future Product” means any Animal Health Product or Poultry Genetics Product, other than an Existing Product or a Pipeline Product, as to which any Merial Venture Company has or may at any time acquire (through internal research and development efforts and/or from other persons) any Product Rights, Patents or Know-How relating to the manufacture, use or sale thereof.

     “GAAP” means, with respect to any country, such country’s generally accepted accounting practices or the International Accounting Standards (“IAS”), in either case as in effect from time to time, consistently applied.

     “Goubin Book Value” has the meaning set forth in Section 5.1(b)(i).

     “Grandfathered Merck Employees” has the meaning set forth in Section 7.1(b).

     “Governmental Order” means any order, writ, judgment, injunction, decree, stipulation, determination or award entered by or with any Public Authority.

     “Governmental Plan” means any plan that is sponsored or maintained by a Public Authority to which either the RP Group or the Merck Group contributes, or is required to contribute, on behalf of any RM Employee or Merck Employee.

     “Goubin” means Compagnie Jean Goubin S.A.

     “Group” means the Merck Group or the RP Group, as appropriate.

     “Hazardous Material” means any substance regulated by any Environmental Law or which may now or in the future form the basis for any Environmental Liability.

     “Health Cost” has the meaning set forth in Section 7.1(c).

     “HSR Act” means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.

     “ICC” means the International Chamber of Commerce.

     “ICE” means the International Centre for Expertise of the ICC.

     “IM” has the meaning set forth in the introduction to this Agreement.

     “IM LLC” has the meaning set forth in Section 1.3(a).

     “Income Taxes” means income, corporation or franchise taxes or other Taxes measured in whole or in part by income or by reference to income, together with any interest or penalties imposed with respect thereto, levied by any Taxing Authority.

     “Indemnified Party” has the meaning set forth in Section 14.7(a).

     “Indemnifying Party” has the meaning set forth in Section 14.7(a).

     “Intellectual Property” of a Person means, collectively, the Product Rights, Patents and Know-How of such Person.

     “Interim Financing” means the revolving credit facilities provided or arranged by each of RP and Merck to Merial in accordance with Section 5.2(d).

     “Inventory” or “Inventories” of any Person means all inventory, merchandise, partially finished and finished products, and raw materials, maintained, held or stored by or for such Person and any prepaid deposits for any of the same; provided that

     “Inventories” of any of Merck or its Subsidiaries shall mean only such inventories as constitute Merck Contributed Assets.

     “Investment Bank” means a reputable international investment bank with experience appraising and selling businesses comparable to the Merial Venture.

      “IRS” means the Internal Revenue Service.

      “ISA” means Institut de Sélection Animale S.A.

     “Know-How” means, in respect of any product, all technical knowledge, ability, skill or expertise in the manufacture or commercialization of such product other than knowledge or expertise covered by a Patent.

     “Label” means, in respect of any Merial Venture Product, the packaging, product brochure or product monograph filed with the appropriate Public Authority (or Public Authorities) having authority to approve the marketing of such Merial Venture Product and the package insert directed to veterinarians or consumers that has been approved by such Public Authority (or Public Authorities) for such Merial Venture Product, including, in each case, the indications, claims, uses and dosages appearing therein.

     “Laws” means any supranational, national, state, local or foreign statute, law, directive, ordinance, regulation, rule, code, order, requirement or rule of common law.

     “Liabilities” means any and all debts, liabilities and obligations, whether accrued or fixed, absolute or contingent, matured or unmatured or determined or determinable, including those arising under any Law (including any Environmental Law), Action or Governmental Order and those arising under any contract, agreement, arrangement, commitment or undertaking.

     “LIBOR” means, in relation to any unpaid sum, the rate per annum equal to the arithmetic mean (rounded upwards, if not already such a multiple, to the nearest whole multiple of one-thirty second of one per cent.) of the offered quotations in the so-called London Interbank loan market as displayed on Pages 3740 or 3750 (as appropriate) on the Telerate Service for the currency in which such unpaid sum is to be denominated and for the relevant specified period at or about 11:00 a.m. (London time) on the second Business Day before the beginning of such specified period.

     “LLC Agreement” means the limited liability company agreement of Merial in the form provided as Exhibit II hereto, as the same may be amended, modified, supplemented or restated from time to time.

     “MACI” has the meaning set forth in Section 1.3(a).

     “Material Adverse Change or Effect” means, with respect to any Person, a change or effect that materially adversely affects, or (except with respect to Sections 12.6(b)(vi) or 12.6(c)(vi), as the case may be) is reasonably likely to materially adversely affect,

     (i) if such determination is to be made on or prior to the Closing, (A) in the case of an RP Company, the assets, liabilities, operations, results of operations or financial condition of RM and its Subsidiaries, taken as a whole; and (B) in the case of a Merck Company, the Merck Contributed Assets or the operations, results of operations or financial condition of the Merck Contributed Business; or

     (ii) if such determination is to be made after the Closing, (A) in the case of a Merial Venture Company, the assets, liabilities, operations, results of operations or financial condition of the Merial Venture; and (B) in the case of an RP Company or a Merck Company, the ability of such company to perform any of its material obligations under this Agreement or any Ancillary or Future Agreement if such obligations are material to the assets, liabilities, operations, results of operations or financial condition of the Merial Venture;

provided that, as used in Articles VIII, IX and X of this Agreement, the terms “Material Adverse Change”, “Material Adverse Effect”, “material” or any similar terms shall mean having an adverse impact or effect or potential adverse impact or effect on the value of RM and its Subsidiaries or the value of the Merck Contributed Assets, as the case may be, or on the aggregate net income of the Merial Venture, of at least [*].

     “Member” means a shareholder of Merial being either the RP Member or the Merck Member, which together shall be the “Members”.

     “Members’ Meeting” has the meaning set forth in Section 4.1.

     “Merck” means Merck & Co. or any Successor Entity thereto.

     “Merck & Co.” has the meaning set forth in the introduction to this Agreement.

     “Merck Accrued Tax Liabilities” has the meaning set forth in Section 5.1(a)(ii)(B).

     “Merck Adjustment Products” has the meaning set forth in Section 6.4(c).

     “Merck Animal Health Executive” means the Merck executive with direct responsibility for Merial reporting to the Chief Executive Officer of Merck and any duly appointed successor in such role, notified in writing by Merck to RP and Merial.

     “Merck Benefit Plan” means each Benefit Plan (other than Merck Employee Agreements) which is now or previously has been sponsored, maintained, contributed to, or required to be contributed to, or with respect to which any withdrawal liability (within the meaning of Section 4201 of ERISA) has been incurred, by Merck, any of its Subsidiaries or any Merck ERISA Affiliate for the benefit of any Merck Employee, and pursuant to which Merck, any of its Subsidiaries or any Merck ERISA Affiliate has or may have any liability, contingent or otherwise.

      “Merck Breach” has the meaning set forth in Section 14.2(b).

      “Merck Company” means any of Merck or its Subsidiaries.

     “Merck Contributed Assets” has the meaning set forth in Section 10.10.

     “Merck Contributed Business” means all the Merck JV Business activities and operations immediately prior to the Closing, other than those activities or operations (i) that Merck will continue to conduct pursuant to the Ancillary Agreements to which Merck or any of its Subsidiaries is a party, (ii) conducted using the assets, properties and rights set forth in Schedule 2-7, and (iii) relating to “The Merck Veterinary Manual” and the Annual Authorizations Service Repertory License Agreement between Copyright Clearance Center, Inc. and Merck & Co. Inc. dated December 31, 1995.

     “Merck Contributed Business Financials” has the meaning set forth in Section 10.5. The Merck Contributed Business Financials are attached as Exhibit XVI.

     “Merck Contributed Debt” has the meaning set forth in Section 5.2(a).

     “Merck Contributed Liabilities” means all of the obligations or Liabilities of Merck or any of its Subsidiaries (whether or not reflected on the Merck Contributed Business Financials or the books and records of Merck or any of its Subsidiaries) arising from, relating to, resulting from or incurred in connection with, the Merck Contributed Business or any of the Merck Contributed Assets or the ownership or operation of, or conduct of any activities on or from, any of the foregoing, including (i) under the agreements, contracts, leases, licenses and other arrangements included within the Merck Contributed Assets, (ii) accounts and other payables, (iii) Environmental Liabilities, (iv) Taxes, (v) threatened, pending or settled litigation, (vi) under Merck Benefit Plans, and (vii) all obligations or Liabilities of the types referred to in the Merck Contributed Business Financials or that are the subject of any of the representations in Article X.

     “Merck Contributed Non-U.S. Assets” means all the Merck Contributed Assets that are not Merck Contributed U.S. Assets.

     “Merck Contributed U.S. Assets” has the meaning set forth in Section 5.1(a)(i).

     “Merck Employee” means each current, former, or retired employee of a Merck Transferred Subsidiary together with those employees listed in Schedule 10.19H-2.

     “Merck Employee Agreement” means each management, employment, severance, consulting, non-compete, confidentiality, or similar agreement or contract between Merck or any of its Subsidiaries and any Merck Employee pursuant to which Merck or any of its Subsidiaries has or may have any liability, contingent or otherwise.

     “Merck ERISA Affiliate” means each business or entity which is a member of a “controlled group of corporations,” under “common control” or an “affiliated service

group” with Merck within the meaning of Sections 414(b), (c) or (m) of the Code, or required to be aggregated with Merck under Section 414(o) of the Code, or is under “common control” with Merck, within the meaning of Section 4001(a)(14) of ERISA.

     “Merck Group” means Merck, together with all its Subsidiaries.

     “Merck JV Business” means, from time to time at any time prior to the Closing, all the Merial Venture Business activities of the Merck Group, including of the Merck Transferred Subsidiaries, throughout the world.

     “Merck Leased Employees” has the meaning set forth in Section 7.1(a).

     “Merck Manufacturing Supply Price Formula” means the Merck Manufacturing Supply Price Formula annexed as Exhibit 10 to the Merck Supply Agreement.

     “Merck Member” means the Member that is a Subsidiary of Merck which shall, as of the Closing, be Merck SH.

     “Merck Negotiated Supply Price” has the meaning set forth in Section 6.7(a).

     “Merck Pre-Closing Taxes” has the meaning set forth in Section 14.12(a).

     “Merck Product Registrations” has the meaning set forth in Section 10.13.

     “Merck Proprietary Rights” has the meaning set forth in Section 10.12(b).

     “Merck Restructuring Event” means any transaction or series of related transactions pursuant to which all or substantially all of the assets of Merck are sold or otherwise transferred to a Third Party.

     “Merck Retirement Plans” has the meaning set forth in Section 7.1(b).

     “Merck SH” has the meaning set forth in the introduction to this Agreement.

     “Merck Stock Option Plan” has the meaning set forth in Section 7.1(d).

     “Merck Transferred Benefit Plan” means the Merck & Co., Inc. Employee Savings and Security Plan and each Merck Benefit Plan sponsored, maintained, or contributed to by a Merck Transferred Subsidiary.

     “Merck Transitory LLC” has the meaning set forth in Section 1.3(a).

     “Merck Transferred Foreign Pension Plan” means each Merck Transferred Benefit Plan that is an “employee pension benefit plan” within the meaning of Section 3(2) of ERISA but that is not subject to Title I or IV of ERISA pursuant to Sections 4(b)(4) and 4021(b)(7) of ERISA.

     “Merck Transferred Pension Plan” means each Merck Transferred Benefit Plan which is an “employee pension benefit plan” within the meaning of Section 3(2) of ERISA and is subject to Title IV of ERISA.

     “Merck Transferred Subsidiaries” means each Subsidiary of Merck listed in Schedule 2-8 hereto.

     “Merial” has the meaning set forth in the introduction to this Agreement.

     “Merial Merck Employees” has the meaning set forth in Section 7.1(a).

     “Merial Venture” means the group comprised of all the Merial Venture Companies.

     “Merial Venture Business” has the meaning set forth in Section 1.2(a).

     “Merial Venture Companies” means collectively Merial and (following its transfer to Merial) each Transferred Subsidiary and any other Subsidiary of Merial from time to time, and “Merial Venture Company” means any one of them.

     “Merial Venture Interest” of a Principal means all direct and indirect equity and other ownership interests of such Principal and any of its Subsidiaries in the Merial Venture.

     “Merial Venture Product” means, from time to time, any one of the Existing Products or Future Products.

     “Net Reported Sales” means, in respect of any Avermectin, Fipronil or Biological Products, as the case may be, the sales amount calculated in the same manner as Net Sales, but without deducting from the gross invoice price of such products the items listed in (iv) and (v) of the definition of Net Sales and calculated for purposes of Sections 6.4 or 6.5, in the case of sales made in the currencies set forth therein, based on the exchange rates set forth in Section 6.4(e).

     “Net Sales” means the gross invoice price (which will not include any taxes) of Avermectin, Fipronil or Biological Products, as the case may be, sold by Merial, its Subsidiaries or sublicensees to the first independent third party after deducting, if not already deducted in the amount invoiced:

     (i) the normal or customary trade and/or quantity discounts, excluding cash discounts, that are actually allowed or granted;

     (ii) returns, rebates and allowances that are actually granted;

     (iii) retroactive price reductions applicable to sales of such products that are actually allowed or granted;

     (iv) sales commissions that are actually paid to third party distributors and selling agents; and

     (v) [*] of the amount invoiced to cover cash discounts, bad debt, freight or other transportation costs, insurance charges, additional special packaging, duties, tariffs and other governmental charges.

With respect to sales of Avermectin or Fipronil Products sold in Combinations, Net Sales shall be calculated in accordance with the provisions of the definition of Net Sales set forth in Exhibit XXI [Avermectin Products Sales Adjustment] or the RP Ag Research Agreement, respectively.

     “Other JVs” means Persons that are, in substance, joint ventures in which (a) the Merck Group or the RP Group, as the case may be, owns 50% or less of both (x) the outstanding equity, and (y) the outstanding equity that has the right to elect or appoint the members of the board of directors or similar governing body of such Person (the Parties hereby conclusively deem the conditions of this clause (a) to be satisfied in respect of Banyu Pharmaceutical Co. Ltd., its Subsidiaries and its and their respective successors), and (b) the principal business of such Person is a business or businesses other than the Animal Health Business or the Poultry Genetics Business.

     “Other Taxes” means all Taxes which are not Income Taxes, including registration and stamp duties (even if related to real property); provided , however , that such term shall not include any real property taxes.

     “Parties” means all the parties to this Agreement and “Party” means any one of them.

     “Patents” means, in respect of any product, any unexpired patents or patent applications in any jurisdiction necessary to make, have made, use or sell such product.

     “Person” or “person” means a natural person or any corporation, partnership, company, limited liability company, association, trust or other entity of any kind whatsoever.

     “Pipeline Products” means, with respect to RM and its Subsidiaries, the products listed under the caption “Pipeline” on page 1 of the RM base case attached as Exhibit XIV hereto and, with respect to the Merck Group, the products listed under the caption “Pipeline” of the Merck base case attached as Exhibit XV hereto.

     “PMSV” means Pasteur Mérieux Sérums et Vaccins S.A.

     “Poultry Genetics Business” has the meaning set forth in Section 1.2(a).

     “Poultry Genetics Products” has the meaning set forth in Section 1.2(c).

     “Pre-Closing Benefit Liabilities” means liabilities incurred, suffered or accrued as of, or otherwise arising out of events or periods occurring prior to, the Closing Date with respect to a Merck Transferred Benefit Plan or an RM Transferred Benefit Plan and calculated as follows: (i) the calculation of liabilities for “employee pension benefit plans” within the meaning of § 3(2) of ERISA and which are defined benefit plans shall be determined as of the Closing Date using the January 1, 1997 census data of each such plan (unless there have been significant demographic changes between January 1, 1997 and the Closing Date, in which case the Closing Date census data of a particular plan shall be used with respect to such plan) and shall be determined (on an accumulated benefit obligation basis) based upon actuarial assumptions used by RM (for RM Transferred Pension Plans) or Merck (for Merck Transferred Pension Plans) for purposes of determining pension expense pursuant to FAS 87 for each such plan for 1997; (ii) the calculation of liabilities for retiree medical plans shall be determined as of the Closing Date using the January 1, 1997 census data of each such plan (unless there have been significant demographic changes between January 1, 1997 and the Closing Date, in which case the Closing Date census data of a particular plan shall be used with respect to such plan) and shall be determined (on an accumulated post-retirement benefit obligation basis)

based upon those actuarial assumptions used by RM (with respect to RM Transferred Benefit Plans which provide retiree medical benefits) or Merck (with respect to Merck Transferred Benefit Plans which provide retiree medical benefits) for calculating the expense for purposes of FAS 106 for 1997; (iii) the calculation of liabilities for RM Transferred Benefit Plans and Merck Transferred Benefit Plans providing post-employment (but pre-retirement) benefits such as salary and health care continuation, supplemental unemployment benefits, severance benefits and disability-related benefits (including workers’ compensation) shall be determined as of the Closing Date using the January 1, 1997 census data of each such plan (unless there have been significant demographic changes between January 1, 1997 and the Closing Date, in which case the Closing Date census data of a particular plan shall be used with respect to such plan) and shall be determined based upon those actuarial assumptions used by RM (with respect to RM Transferred Benefit Plans which provide such benefits) or Merck (with respect to Merck Transferred Benefit Plans which provide such benefits) for calculating the expense for purposes of FAS 112 for 1997; provided , however , that the calculation of liabilities for long-term disability plans shall include liability for any employee who has commenced or is eligible to commence benefits under a short-term disability plan maintained by his or her employer as of the Closing Date and becomes eligible to receive, after the Closing Date, benefits under a long-term disability plan of the Merial Venture as a result of such pre-Closing disability, provided that such disability is continuous in accordance with the terms of the applicable plan; (iv) the calculation of other liabilities for RM Transferred Benefit Plans and Merck Transferred Benefit Plans which are medical or dental plans shall be based on claims for treatment or services received or other expenses incurred prior to the Closing and reported prior to December 31, 1997; (v) liabilities for RM Transferred Benefit Plans and Merck Transferred Benefit Plans which are bonus plans shall be equal to a pro rata portion (based on the percentage of the bonus period up to and including the Closing Date) of the bonus that is paid with respect to the full bonus period; and (vi) the liability for any RM Transferred Benefit Plan or Merck Transferred Benefit Plan not covered by clauses (i) through (v) above including any and all such plans maintained outside of the U.S., shall be determined using generally accepted actuarial or accounting principles, and using such actuarial or other assumptions as may be necessary, and as agreed to by RP and Merck. Pre-Closing Benefit Liabilities shall be calculated by

the plan actuary for the plan at issue (or if there is no plan actuary, by the actuary or accountant appointed by the plan sponsor); provided , however , that if Merck or RP dispute the determination of such liabilities made by such actuary (or accountant, as applicable), Merck and RP shall jointly choose an actuary or accountant, as applicable, to perform such calculation and the determination of the jointly chosen actuary or accountant, as applicable, shall be binding on RP and Merck. Pre-Closing Benefit Liabilities shall exclude RM Pre-Closing Taxes and Merck Pre-Closing Taxes.

     “Pre-Closing Tax Period” in relation to a Person means all taxable periods of that Person ending on or before the Closing Date.

     “Principal” means each of RP and Merck, which are together the “Principals.”

     “Product Liability” means any Damages that arise as a result of, or in connection with, the use by a Third Party of a Merial Venture Product.

     “Product Registration” means, with respect to a product, the product registration (final and pending) or any other authorizations of Public Authorities necessary to market such product in any country.

     “Product Rights” means, with respect to a product and its marketing, distribution and sale in a country, (i) the Product Registrations, and (ii) all product trademarks, service marks, trade dress and copyrights necessary to market, distribute and sell such product in that country.

     “Public Authority” means any supranational, national, regional, state or local government, court, tribunal, governmental agency, authority, board, bureau, instrumentality or regulatory body.

     “Qualified Future Other JVs ” means Other JVs for so long as no member or representative of the Merck Group or the RP Group, as applicable, initiates or takes other affirmative action to cause such Other JV to commence an Animal Health Business or

Poultry Genetics Business other than (a) de minimis activities that are incidental to the principal business or businesses of such Other JV or (b) which result from the exploitation of a product (including for the Animal Health or Poultry Genetics Business) invented or developed in the principal business or businesses (i.e. non Animal Health or Poultry Genetics Business) of such Other JV.

     “Receivables” of any person means any and all accounts receivable of such person and all notes and other amounts receivable by such person from third parties, including, without limitation, customers and employees, whether or not in the ordinary course of business, together with any unpaid financing charges accrued thereon; provided that “Receivables” of any of Merck or its Subsidiaries shall mean only such receivables as constitute Merck Contributed Assets.

     “Representative” of a Member has the meaning set forth in Section 4.2(d).

     “Research Agreements” means, collectively, the Merck Research Agreement, the RPR Research Agreement, the RP Ag Research Agreement and the PMSV Research Agreement.

     “Retained Inventory” shall have the meaning set forth in Section 5.1(a)(ii)(C).

     “Retained Receivables” shall have the meaning set forth in Section 5.1(a)(ii)(C).

     “Retirement Cost” shall have the meaning set forth in Section 7.1(b).

     “Retroactive Closing Mechanism” shall have the meaning set forth in Section 6.3(a).

     “Retroactive Closing Financial Statements” shall have the meaning set forth in Exhibit XIX hereto.

     “Returns” means all returns, reports, declarations, estimates, information returns, statements and forms of any nature regarding Taxes, including remittance advice, required to be filed with any Taxing Authority.

     “Rhône-Poulenc” has the meaning set forth in the introduction to this Agreement.

     “RM” has the meaning set forth in the introduction to this Agreement.

     “RM Accrued Tax Liabilities” has the meaning set forth in Section 5.2(b).

     “RM Benefit Plan” means each Benefit Plan (other than RM Employee Agreements) which is now or previously has been sponsored, maintained, contributed to, or required to be contributed to, or with respect to which any withdrawal liability (within the meaning of Section 4201 of ERISA) has been incurred, by RP, any of its Subsidiaries or any RM ERISA Affiliate for the benefit of any RM Employee, and pursuant to which RP, any of its Subsidiaries or any RM ERISA Affiliate has or may have any liability, contingent or otherwise.

     “RM Contributed Liabilities” means all of the obligations or Liabilities of RM or any of its Subsidiaries (whether or not reflected on the RM Financials or the books and records of RM or any of its Subsidiaries).

     “RM Employee” means each current, former, or retired employee of an RM Transferred Subsidiary together with those employees listed on Schedule 8.18A-2.

     “RM Employee Agreement” means each management, employment, severance, consulting, non-compete, confidentiality, or similar agreement or contract between RP or any of its Subsidiaries and any RM Employee pursuant to which RP or any of its Subsidiaries has or may have any liability contingent or otherwise.

     “RM ERISA Affiliate” means each business or entity which is a member of a “controlled group of corporations,” under “common control” or an “affiliated service

group” with RP within the meaning of Sections 414(b), (c) or (m) of the Code, or required to be aggregated with RP under Section 414(o) of the Code, or is under “common control” with RP, within the meaning of Section 4001(a)(14) of ERISA.

     “RM Financials” has the meaning set forth in Section 8.5. The RM Financials are attached as Exhibit XVII.

     “RM Intercompany Debt” has the meaning set forth in Section 5.2(b).

     “RM Outstanding Debt” has the meaning set forth in Section 5.2(b).

     “RM Plans” has the meaning set forth in Section 7.1(e).

     “RM Pre-Closing Taxes” has the meaning set forth in Section 14.11(a).

     “RM Proprietary Rights” has the meaning set forth in Section 8.11(b).

     “RM Transferred Benefit Plan” means each RM Benefit Plan sponsored, maintained, or contributed to by an RM Transferred Subsidiary.

     “RM Transferred Foreign Pension Plan” means each RM Transferred Benefit Plan that is an “employee pension benefit plan” within the meaning of Section 3(2) of ERISA but that is not subject to Title I or IV of ERISA pursuant to Sections 4(b)(4) and 4021(b)(7) of ERISA.

     “RM Transferred Pension Plan” means each RM Transferred Benefit Plan which is an “employee pension benefit plan” within the meaning of Section 3(2) of ERISA and is subject to Title IV of ERISA.

     “RM Transferred Subsidiaries” means, collectively, RM and each Subsidiary of RM listed in Schedule 2-11 hereto.

     “RM U.S. Employees” has the meaning set forth in Section 7.1(e).

     “RM 401(k) Plan” has the meaning set forth in Section 7.1(e).

     “RP” means Rhône-Poulenc S.A. or any Successor Entity thereto.

     “RP Adjustment Products” has the meaning set forth in Section 6.4(b).

     “RP Ag” means Rhône-Poulenc Agrochimie S.A.

     “RP Ag Manufacturing Supply Price Formula” means the Manufacturing Supply Price Formula annexed as Exhibit 3 to the RP Ag Supply Agreement.

     “RP Animal Health Executive” means the individual named in Schedule 2-12 and any duly appointed successor to such individual, notified in writing by RP to Merck and Merial.

     “RP Breach” has the meaning set forth in Section 14.2(b).

     “RP Company” means any of RP or its Subsidiaries.

     “RP Contributed Debt” has the meaning set forth in Section 5.2(b).

     “RP Finance” has the meaning set forth in Section 1.3(a).

     “RP Group” means RP, together with all its Subsidiaries.

     “RP Member” means the Member that is a Subsidiary of RP which shall, subject to sections 17.1 and 17.2, be IM.

     “RP Restructuring Event” means any transaction or series of related transactions pursuant to which (i) any of RP Ag, PMSV or RPR ceases to be a Subsidiary of RP, or

(ii) all or substantially all of the assets of any of RP Ag, PMSV or RPR are sold or otherwise transferred to a Third Party.

“RPR” means Rhône-Poulenc Rorer S.A.

“SAS” means société par actions simplifiée.

“Special Dividend” has the meaning set forth in Section 6.2(a).

     “Straddle Period” means, in relation to a Person, the taxable period of that Person that includes the Closing Date.

     “Subsidiary” means, with respect to any Person (herein referred to as the “parent”), any corporation, partnership, company, association, trust or other business entity (a) of which securities or other ownership interests representing more than 50% of the equity or more than 50% of the ordinary voting power or more than 50% of the general partnership or analogous interests are, at the time such determination is being made, owned, Controlled or held by the parent and/or one or more other Subsidiaries of the parent, or (b) which is, at the time such determination is made, otherwise Controlled, by the parent and/or one or more other Subsidiaries of the parent; provided that it shall be deemed that (i) as from the Closing Date, none of the Merial Venture Companies shall be a Subsidiary of either Merck or RP; and (ii) none of the Existing Other JVs or Qualified Future Other JVs shall be a Subsidiary of either Merck or RP.

     “Successor Entity” has the meaning set forth in the definition of Change of Control above.

     “Supply Agreements” means, collectively, the Merck Supply Agreement and the RP Ag Supply Agreement.

     “Tax” means any tax, including, without limitation, income (net or gross), corporations, capital gains, gross receipts, franchise, estimated, alternative, minimum,

add-on minimum, sales, use, transfer, registration, value added, excise, natural resources, severance, stamp, occupation, premium, windfall profit, customs, duties, real property, personal property, capital stock, social security, unemployment, disability, payroll, license, employee or other withholding, or other tax, of any kind whatsoever, and including any interest, penalties or additions to tax, levied by any Taxing Authority.

     “Taxing Authority” means any governmental authority, including, but not limited to agencies of the European Union, the United States federal government, the government of the French Republic, the government of the United Kingdom, or the government of any other country, and any political subdivision of any of the foregoing, having jurisdiction over the assessment, determination, collection, or other imposition of Tax.

     “Tax Benefit” means any items of loss, deduction or credit or any other item to the extent such item decreases Taxes paid or payable including any interest and penalty with respect thereto or interest that would have been payable but for such item.

     “Tax Matter” means any Tax matter, including any audit, examination, assessment, notice of deficiency or other adjustment or proposed adjustment, or administrative or judicial proceeding, the settlement of any of the foregoing, or the filing of any amended return.

     “Third Party” means a person who or which is neither a Merial Venture Company nor a Merck Company nor an RP Company.

     “Third Party Claim” has the meaning set forth in Section 14.7(a).

     “Transactions” means, collectively, all the transactions contemplated by this Agreement and the Ancillary Agreements.

     “Transferred Subsidiaries” means, collectively, the RM Transferred Subsidiaries and the Merck Transferred Subsidiaries.

     “U.S.” means the United States of America.

     “U.S. Animal Health Employees” has the meaning set forth in Section 7.1(f).

     “U.S. Person” means any company or other Person that is formed or domesticated under the laws of any state of the United States of America.

ARTICLE III

MERIAL VENTURE COMPANIES

SECTION 3.1. Merial

     (a)  Merial as Principal Entity . Merial shall be the parent company of the Merial Venture. Any entity created by Merial or any Merial Venture Company in any country to conduct Merial Venture Business operations shall be a Subsidiary of Merial.

     (b)  Location of Offices . The principal office of Merial shall be in London, England.

SECTION 3.2. Reorganization of Subsidiaries Prior to Closing

     Prior to the Closing, the following actions shall be taken:

     (a) Merck shall cause each of the Merck Transferred Subsidiaries that is a U.S. Person to be reorganized as a limited liability company which is not classified as an association taxable as a corporation for U.S. federal income tax purposes.

     (b) RP shall cause RM to be reorganized as a SAS, which is not classified as an association taxable as a corporation for U.S. federal income tax purposes. RP shall cause such reorganized entity to be wholly owned by Merial, except for one share therein which will be owned by a newly-formed single member Delaware limited liability company which is not classified as an association taxable as a corporation for U.S. federal income tax purposes, which shall itself be wholly owned by Merial.

     (c) RP shall cause the share ownership of all the Subsidiaries of Rhone Merieux, Inc. that are not U.S. Persons to be transferred to Merial or to Subsidiaries of Merial that are not U.S. Persons, it being understood that RP shall not be required to cause any such transfer which would result in an aggregate (for all such transfers) adverse

tax consequence for the RP Group in excess of [*].

     (d) IM shall cause Merial to elect classification as a partnership for U.S. federal income tax purposes.

ARTICLE IV

GOVERNANCE

     Merial is, as at the date hereof, an English private company limited by shares governed by the Laws of England and Wales and shall, as of the Closing, be governed by the Association Documents. As of the Closing, Merial will, pursuant to the Delaware Act, be domesticated in Delaware as a Delaware limited liability company governed by the LLC Agreement and, to the extent applicable, Delaware Laws. To the extent that the provisions of English Laws governing Merial and the provisions of Delaware Laws governing Merial are not identical, the Directors and the Members shall take such steps as are reasonably required to ensure that Merial complies with both such Laws. Merial is, in addition, otherwise subject to the relevant provisions of this Agreement.

SECTION 4.1. Company Bodies of Merial

     The company bodies of Merial are:

SECTION 4.2. Members’ Meeting

     (a)  Members’ Meeting as Ultimate Authority of Merial . The Members’ Meeting shall be the ultimate authority of Merial. Certain fundamental decisions affecting Merial shall require the approval of the Members’ Meeting.

     (b)  Resolutions of the Members’ Meeting . The following actions shall require a resolution of the Members’ Meeting:

     (i) the dissolution or winding up of, or any merger, joint venture or partnership involving, or the acquisition or reorganization of, Merial;

     (ii) any arrangement for the acquisition of all or substantially all of the assets or undertakings of Merial;

     (iii) any modification of the Association Documents or the LLC Agreement, including, without limiting the generality of the foregoing, any increase or decrease of Merial’s authorized share capital or the issuance by Merial of any securities or interests, or any options, warrants or other rights to acquire such securities or interests;

     (iv) the undertaking of any significant business activities outside the scope of the Merial Venture Business;

     (v) the approval of the annual financial statements (including income and cash flow statements and balance sheet) of Merial;

     (vi) the payment or declaration of any dividend or distribution or the entering into of any transaction by reference to, or which will have the effect of reducing, Merial’s Distributable Profits, except as expressly contemplated by this Agreement, and in particular by Article VI ;

     (vii) any request for capital contributions by the Members;

     (viii) the appointment or removal of the auditor(s) of Merial;

     (ix) any matter put to the Members’ Meeting for its resolution by the Board of Directors or either of the Members; and

     (x) all other matters required by applicable Laws to be decided or approved by the Members.

     (c)  Unanimous Vote in the Members’ Meeting . Decisions of the Members’ Meeting shall require the agreement of both Members.

     (d)  Selection of Representatives . Each of the Members shall designate, prior to or at the commencement of the Closing Meeting, either (A) one representative who shall be authorized to cast such Member’s vote at all meetings of the Members until another individual is designated to cast such vote or (B) several representatives, each of whom shall be authorized to cast such Member’s vote at the meetings which shall be specified in such representative’s designation, and, for each such representative, until another individual is designated to cast such vote. Each such designation may specify the terms of any substitution (as in the case of absence or otherwise). A memorandum in the form set out in the Association Documents recording such designation shall be made in writing and delivered to the other Member, and details of the relevant designation may be read into the minutes of the meeting at the commencement of the meeting and the memorandum thereafter so delivered. The vote of a Member’s designated representative or of the substitute for such representative, if applicable (such designated representative or substitute being the “Representative”), in the Members’ Meeting shall in all cases be deemed to be the decision of such Member. Any appointment by or notification of either such Representative under this Article IV shall in all cases be deemed to be the appointment by or notification of the respective Member.

     (e)  Voting by the Members in the Members’ Meeting . Each of the Members shall at all times exercise or cause to be exercised all of its powers and votes as a member of Merial such that Merial shall comply with all obligations under and implement all provisions of this Agreement, the LLC Agreement and the Association Documents, as validly amended from time to time.

     (f)  Members’ Meetings . Non-voting representatives of either Member may attend any Members’ Meetings in addition to the Representatives. A quorum shall exist in a Members’ Meeting if Representatives of both Members are present. Decisions may also be taken by the Members’ Meeting by unanimous written resolution of both Members.

     (g)  New Members’ Meeting in Case of Inability to reach a Decision . If, with respect to a specific matter, the Members are unable to reach a decision in the Members’ Meeting, then each Member has the right to request a new Members’ Meeting to discuss the same matter. Such new Members’ Meeting shall occur within thirty (30) days after the date of the last Members’ Meeting.

     (h)  Deadlock, Conciliation . If at such second Members’ Meeting, the Members are still deadlocked with respect to said matter, within seven (7) days thereafter the matter shall be referred for resolution pursuant to the terms of Section 18.1 to the RP Animal Health Executive and the Merck Animal Health Executive.

     (i)  Discussion of Agenda Prior to Members’ Meeting . At the request of either Member, the points of the agenda shall be discussed between representatives of the Members prior to any Members’ Meeting.

     (j)  Calling for a Members’ Meeting . A Members’ Meeting may be called by the Board of Directors or by any Member. Members’ Meetings shall take place at the registered office of Merial unless another location is agreed upon by both Members.

     (k)  Annual Members’ Meeting . Subject to the requirements of the Companies Act, the annual Members’ Meeting shall be held within six (6) months after the end of each Fiscal Year. It shall consider the approval of Merial’s annual financial statements, the allocation (in accordance with the other provisions of this Agreement) of any Distributable Profits and the appointment of Merial’s auditors, when required.

SECTION 4.3. Board of Directors

     (a)  Powers of the Board of Directors . The fundamental policies and the strategy of Merial shall be determined by its board of directors (the “Board of Directors”). The Board of Directors shall have responsibility for approving the annual budget and Business Plan and shall oversee their implementation by the Executive Chairman and the other Executive Officers. Except for matters requiring the approval of

the Members’ Meeting and subject to the Members’ Meetings’ decisions, the Board of Directors shall have the responsibility for making all significant decisions of Merial. In particular, Merial shall not do, either directly or indirectly, any of the following with respect to the Merial Venture without the prior approval of the Board of Directors:

     (i) take any action that affects the ownership or nature of the share capital of RM or the nature of the share capital of Merial, it being understood that any change in the ownership of the share capital of Merial shall be deemed for the purposes of this Section 4.3(a)(i) not to affect the ownership or nature of the share capital of RM or the nature of the share capital of Merial (the Directors appointed by the RP Member being hereby reminded by RP that they should, prior to participating in such approval or taking any other action affecting the RP Member’s ownership interest in Merial, consult with tax counsel and may wish to obtain confirmation from the French Direction Générale des Impôts of the effect of such action on the agrément fiscal described in Section 11.2(b) and any potential for substantial Taxes to be imposed on RP);

     (ii) except as previously approved in writing in the annual budget, invest in, acquire or dispose of assets or businesses in any manner, or encumber assets in any manner, or incur or assume any indebtedness, enter into long term contracts, or generally undertake any other matter of extraordinary importance or particular strategic importance, in one transaction or a series of related transactions, in each case in excess of [*];

     (iii) subject to Section 4.3(a)(1), acquire, purchase, subscribe for, dispose of or transfer any shares, debentures, partnership interest or other interests in or securities of (or any interest therein) any Person, in one transaction or a series of related transactions, in each case in excess of [*];

     (iv) approve Merial’s annual financial statements prior to their submission to the Members’ Meeting;

     (v) form, sell, dissolve, liquidate or terminate any Merial Venture Company or take any company action in connection therewith;

     (vi) undertake or terminate any major research or development program;

     (vii) initiate or settle any significant litigation or provide any undertaking (except in the ordinary course of business) to a Public Authority;

     (viii) appoint, remove or replace any of the Executive Officers;

     (ix) enter into any agreement providing for (A) the sale or licensing out of any potentially significant Intellectual Property; or (B) the purchase or licensing in of any Intellectual Property involving the payment or potential payment of more than [*];

     (x) change any of the accounting principles or practices to be applied in the preparation of financial statements or change Merial’s accounting reference date;

     (xi) determine the remuneration and other terms and conditions of employment of any of the Executive Officers of Merial, except as applicable to employees generally;

     (xii) enter into (except for the Ancillary Agreements to be entered into as provided in this Agreement) or terminate or amend or waive any material term or condition under any contract or transaction between any Merial Venture Company, on the one hand, and either an RP Company or a Merck Company, on the other;

     (xiii) provide any loan or advance or credit (other than customary trade credit) to, or incur any guarantee, surety, indemnity, Encumbrance or other obligation in favor of, any RP Company or Merck Company;

     (xiv) make aggregate (across all Merial Venture Companies) charitable contributions in any year in excess of [*];

     (xv) enter into, or terminate or amend or waive any material term or condition under, any employment or other contract with any Executive Officer or with any other employee of Merial whose annual emoluments are reasonably expected to exceed [*], create or adopt new employee benefit or general bonus plans or materially amend existing employee benefit or bonus plans, except as required to comply with the terms of this Agreement, or make loans or severance payments to employees except in accordance with policies previously approved by the Board of Directors or with the terms of this Agreement;

     (xvi) approve and implement, or disapprove, any corrective, preventive or remedial plan in response to an Environmental Liability at any site where the total projected costs of such plan (including all phases of such plan responding to the Environmental Liability) at such site are expected to exceed [*];

     (xvii) the issuance by any Subsidiary of Merial of any equity securities or interests, or any options, warrants or other rights to acquire such equity securities or interests; and

     (xviii) any other matter required by applicable Laws to be decided upon or approved by the Board of Directors.

     (b)  Formation and Members of the Board of Directors . At the Closing, a Board of Directors shall be formed for Merial which shall consist of six (6) members. Three (3) members shall be appointed by the RP Member and three (3) members shall be appointed by the Merck Member, each for a term of office of six (6) years (each, a “Director”, and together, the “Directors”). The right of the RP Member and the Merck Member to appoint Directors shall include the right to remove and to replace Directors they have each appointed.

     (c)  Executive Officers not Directors . None of the Executive Officers shall be Directors or shall have the right to vote at any meeting of the Board of Directors.

     (d)  Executive Chairman and CEO to be Observers . Unless the Board of Directors expressly decides otherwise with respect to a particular matter or meeting, the Executive Chairman and, for so long as there is one, the CEO shall be observers of the Board of Directors, with the right to be notified of, to attend and to be heard at every meeting of the Board of Directors.

     (e)  Agenda for and Chairing of Meetings . The agenda for meetings of the Board of Directors shall be prepared by the secretary of Merial and shall include all matters proposed by either Member. Each meeting of the Board of Directors shall be chaired by one Director, who shall be named in the agenda for the meeting. The Closing Meeting shall be chaired by a Director nominated by IM. The following meeting of the Board of Directors shall be chaired by a Director nominated by Merck SH and, thereafter, each meeting shall alternatively be chaired by a Director appointed by the RP Member and a Director appointed by the Merck Member.

     (f)  Quorum in Meetings of the Board of Directors, Unanimous Vote . A quorum shall exist in a meeting of the Board of Directors if at least four (4) Directors, two (2) nominees of the RP Member and two (2) nominees of the Merck Member, are present or represented. Resolutions of the Board of Directors shall only be valid if passed unanimously by all the Directors present at a meeting.

     (g)  New Meeting in Case of Inability to Reach a Decision . If, with respect to a specific matter, the Board of Directors is unable to reach a decision in a meeting of the Board of Directors, then any Director has the right to request a new meeting to discuss the same matter. Such new meeting of the Board of Directors shall occur within thirty (30) days after the date of the last meeting.

     (h)  Deadlock, Conciliation . If, at such second meeting of the Board of Directors, unanimity cannot be reached and the Board of Directors is still deadlocked,

within seven (7) days after such meeting the matter shall be referred for resolution pursuant to the terms of Section 18.1 to the RP Animal Health Executive and the Merck Animal Health Executive.

     (i)  Meetings of the Board of Directors . The Board of Directors shall meet at least three (3) times per calendar year and at such other times as may be requested by any Director. Meetings shall be in person and take place at the registered office of Merial or in any other manner by which all persons participating in the meeting may hear and speak to each other, unless all of the Directors agree otherwise. Alternatively, decisions of the Board of Directors may be taken by unanimous written resolution of all the then-incumbent Directors.

     (j)  Minutes of Meetings of the Board of Directors . All meetings of the Board of Directors shall be recorded in minutes reflecting the place and date of the meeting, the participants therein, the items on the agenda, the material contents of discussions and the resolutions adopted by the Board of Directors. The minutes shall be signed by the Director chairing the meeting pursuant to Section 4.3(e) and by at least one Director nominated by the other Member, and a copy of the minutes shall be delivered to each Director, to each Member, to the Executive Chairman and, for so long as there is one, to the CEO.

     (k)  Committees

     Subject to the general oversight and authority of the full Board of Directors, the following committees of the Board of Directors shall be established and maintained:

     (i) an Audit Committee, which shall consist of four persons appointed by the Board of Directors, two of whom shall be appointed by each of the Members and which shall be responsible for (aa) reviewing the accounts and accounting policies of Merial, (bb) meeting with Merial’s auditor(s) to review accounting issues, (cc) discussing potential distributions, and (dd) for presenting the yearly financial statements of Merial to the Board of Directors for its

consideration, and shall have such powers as the Board of Directors may delegate to it from time to time;

     (ii) a Compensation Committee, which shall consist of four persons two of whom shall be appointed by each of the Members, and which shall be responsible for reviewing the executive and employee compensation policies of Merial and for proposing employee benefit plans and arrangements to the Board of Directors for its consideration, and shall have such powers as the Board of Directors may delegate to it from time to time;

     (iii) a Financing Committee, which shall consist of four persons two of whom shall be appointed by each of the Members, and which shall be responsible for reviewing the financing policies of Merial, including generally Merial’s capital and debt structure, capital expenditures and other matters of a financial and tax nature to be discussed by the Board of Directors, and for presenting resolutions relating to financing to the Board of Directors for its consideration, and shall have such powers as the Board of Directors may delegate to it from time to time; and

     (iv) an Executive Committee, of two persons, consisting of one Director appointed by each of the Members, and which shall assist the Executive Chairman, the CEO, and the Board of Directors in order to facilitate and expedite decision making by the Board of Directors, and shall have such powers as the Board of Directors may delegate to it from time to time.

     The Board of Directors may delegate any of its powers to any other committee, temporary or permanent, as it deems appropriate.

     (1)  Limitations on Directors’ Duties. Merck agrees that it shall not (and shall cause its Subsidiaries not to), in relation to any Directors appointed by the RP Member, and RP agrees that it shall not (and shall cause its Subsidiaries not to), in relation to any Directors appointed by the Merck Member, take any action against such Director for negligence, default, breach of duty or breach of trust on the grounds that such negligence,

default, breach of duty or breach of trust arose by virtue of the Director acting in accordance with the instructions of the Member appointing such Director. Merck, the Merck Member, RP and the RP Member agree that, in the event of any Director acting in accordance with the instructions, or in the interests of, the Member appointing such Director, then any resultant dispute shall be considered to be a dispute between the Parties to be resolved exclusively in accordance with the provisions of Article XVIII hereof.

SECTION 4.4. The Executive Chairman. CEO and other Executive Officers

     (a)  Day-to-Day Management of the Merial Venture . Except for matters requiring the approval of the Members’ Meeting or of the Board of Directors, and subject to the decisions of the Members’ Meeting and of the Board of Directors, the Executive Chairman of Merial (the “Executive Chairman”) shall have the responsibility and authority to manage and operate the day-to-day business of Merial with the assistance of the other Executive Officers and in accordance with Merial’s current annual budget and Business Plan.

     (b)  Appointment of the Executive Chairman

     (i) The Executive Chairman’s term of office shall have a duration of two years.

     (ii) The Person designated as initial Executive Chairman (the “Initial Chairman”) in Schedule 4.4 shall be nominated by the Merck Member and shall be appointed as Executive Chairman of Merial as of the Closing Date. At the expiry of his term of office, the parties intend that the Initial Chairman shall no longer be an officer or employee of the Merial Venture and at that time may return to a position within Merck. At the expiry of the Initial Chairman’s term of office, a new Executive Chairman shall be appointed by the RP Member, subject to the consent of the Merck Member (which consent shall not be unreasonably withheld). The RP Member shall communicate in writing its choice of Executive

Chairman to the Merck Member at the latest one (1) month prior to the end of the Initial Chairman’s term of office.

     (iii) Subsequent Executive Chairmen shall be appointed by the Board of Directors, which shall also have the right to remove and replace the Executive Chairman.

     (c)  Responsibilities of the Executive Chairman . The Executive Chairman shall be the head of the executive organization of the Merial Venture and (subject to Sections 4.2(b) and 4.3(a)) shall have the full authority to represent and bind Merial. The Initial Chairman appointed pursuant to the first sentence of Section 4.4(b)(ii) shall, in particular, be responsible for overseeing and managing the research and development and corporate staff functions and Poultry Genetics Business activities of the Merial Venture. The Executive Chairman shall also be responsible for strategic planning, including the preparation and presentation to the Board of Directors of Merial’s annual budget and its rolling three (3) year business plan (the “Business Plan”). The Business Plan shall set forth the goals, strategies and action plans of the Merial Venture over the current Fiscal Year and the two succeeding Fiscal Years, and shall include sub-plans for investment, research and development, manufacturing, marketing and personnel. The Members may at any time alter the duration or scope of the Business Plan. The Executive Chairman shall report to the Board of Directors.

     (d)  Appointment of other Executive Officers . Merial shall have such other executive officers in addition to the Executive Chairman (together with the Executive Chairman, each an “Executive Officer” and, collectively, the “Executive Officers”) as shall be determined by the Board of Directors after receiving the recommendation of the Executive Chairman (it being understood that the Board of Directors may nominate Executive Officers other than those recommended by the Executive Chairman). The list of initial Executive Officers is set forth in Schedule 4.4. The Board of Directors shall have the power to appoint, remove and replace any of the Executive Officers.

     (e)  Appointment of the Chief Executive Officer (the “CEO”) . The person designated as CEO in Schedule 4.4 shall be nominated by the RP Member and shall be appointed as CEO of Merial for a two year term of office as of the Closing Date. At the expiry of such term of office, unless the Board of Directors expressly decides otherwise, the position of CEO shall be terminated, and all the responsibilities of the CEO shall be combined with those of the Executive Chairman.

     (f)  Responsibilities of the CEO . The CEO appointed pursuant to Section 4.4(e) shall be responsible for overseeing and managing the sales, marketing and manufacturing activities of the Merial Venture, and shall have other specific responsibilities and authority as delegated to him from time to time by the Executive Chairman. The CEO shall report to the Executive Chairman.

ARTICLE V

CONTRIBUTIONS TO THE MERIAL VENTURE

CERTAIN TAX MATTERS

SECTION 5.1. Contributions of Assets and Assumption of Liabilities

     (a)  Merck Contribution . On the terms and subject to the conditions of this Agreement (and subject specifically to the representations, warranties and covenants made by Merck in this Agreement) and the Merck Transfer Agreement, and subject to subsections (i), (ii) and (iii) below and to Sections 11.2(c) and 11.6, (x) Merck shall, on or prior to the Closing Date or as soon thereafter as practicable as provided in Section 5.1(a)(ii), assign, transfer, convey and deliver (by merger, sale or otherwise) to Merial or its Subsidiaries, or cause to be assigned, transferred, conveyed and delivered (by merger, sale or otherwise) to Merial or its Subsidiaries, all of the Merck Contributed Assets, and (y) Merial (or its relevant Subsidiary) shall, on the Closing Date, assume and agree to pay, perform, fulfill and discharge when due all of the Merck Contributed Liabilities.

     (i) U.S. Assets and Liabilities . Merck shall, on or prior to the Closing Date, assign, transfer, convey and deliver to Merck Transitory LLC: (A) the entirety of the assets and liabilities of Hubbard Farms, Inc., together with all of Hubbard Farms, Inc.’s direct and indirect ownership interests in each of its Subsidiaries except as indicated in Schedule 2-8 (such transaction to be effected in accordance with Section 1.3(a)(i)(B)), (B) to the extent indicated in Schedules 10.12 and 10.13, all of the Product Registrations and trademark registrations and trademark applications included in the Merck Contributed Assets that are owned by Merck or a Subsidiary of Merck that is a U.S. Person, (C) all other Merck Contributed Assets not covered by (A) and (B) above that are located in or registered in the U.S., including real estate or personal property, or that are owned by Merck or a Subsidiary of Merck that is a U.S. Person (other than the Retained Receivables and the Retained Inventory, as defined in Section 5.1(a)(ii)(C)), (D) all of the contracts included in the Merck Contributed Assets to which Merck or a Subsidiary of Merck that is a U.S. Person is a party (the assets

listed in (A) through (D) together being the “Merck Contributed U.S. Assets”). Merck Transitory LLC shall, on or prior to the Closing Date, assume and agree to pay, perform, fulfill and discharge when due all of the Merck Contributed Liabilities reasonably attributable to the Merck Contributed U.S. Assets contributed to Merck Transitory LLC or their ownership or operation. The Parties understand that the contribution of the entirety of the assets and liabilities of Hubbard Farms, Inc. to Merck Transitory LLC will result in Merial being engaged in both the Animal Health Business and the Poultry Genetics Business. Merial shall create separate divisions within the Merial Venture for each of these businesses and shall prepare stand-alone financial statements for each division.

     (ii) Non-U.S. Assets and Liabilities .

     (A) Purchase of Assets and Assumption of Liabilities .

     (1) Valuation. Prior to the Closing, the Principals will agree on the aggregate fair market value of all the Merck Contributed Non-U.S. Assets (other than the cash and cash equivalent items included in such assets) net of the Merck Contributed Liabilities (other than the Merck Contributed Debt and the Merck Accrued Tax Liabilities (as defined in Section 5.1(a)(ii)(B)) reasonably attributable to such assets that will be purchased by Merial or any of its Subsidiaries (such value, after netting, being the “Merck Non-U.S. Net Assets Value”). For purposes of calculating the Merck Non-U.S. Net Assets Value, [*]

[*].

     (2) Purchasing Entity . Merial or the appropriate Merial Subsidiaries agreed upon by the Principals (which generally shall be the Merial Subsidiaries located in the country in which each such asset is to be used) shall purchase each Merck Contributed Non-U.S. Asset from the Merck Subsidiary that owns such asset. Merial shall, and shall cause each of its Subsidiaries that has purchased any Merck Contributed Non-U.S. Assets to, on the Closing Date, assume and agree to pay, perform, fulfill and discharge when due all of the Merck Contributed Liabilities reasonably attributable to

such purchased Merck Contributed Non-U.S. Assets or their ownership or operation.

     (3) Consideration for Purchase . The aggregate consideration for the Merck Non-U.S. Assets shall be cash in an amount equal to the Merck Cash Contribution Amount as defined in and contributed by Merck pursuant to Section 5.1(a)(ii)(B) and/or promissory notes issued to the selling Merck Subsidiaries, in accordance with the provisions of this Section 5.1(a)(ii)(A)(3). To the extent the actual aggregate purchase price paid for all the Merck Contributed Non-U.S. Assets pursuant to clause (1) above exceeds the Merck Cash Contribution Amount (as defined in Section 5.1(a)(ii)(B)), or to the extent the Principals otherwise agree, purchases of the Merck Contributed Non-U.S. Assets by Merial and the Merial Subsidiaries may be made with promissory notes issued to the selling Merck Subsidiaries.

     (4) Timing of Purchase . Each of the Parties shall (and shall procure that their respective Subsidiaries shall) cooperate and use commercially reasonable efforts (x) to give effect to, on the Closing Date, the purchase and sale of all the Merck Contributed Non-U.S. Assets and the assumption of the Merck Contributed Liabilities reasonably attributable thereto in accordance with this Section 5.1(a)(ii)(A), and (y) to the extent it is not possible (including by reason of not having obtained required approvals from appropriate Public Authorities and/or having completed workers’ council consultations or similar processes under applicable Laws) or reasonably practicable to purchase and sell certain Merck Contributed Non-U.S. Assets or to assume the Merck Contributed Liabilities reasonably attributable thereto effective as of the Closing Date, to give effect to the purchase and sale of each such asset and the assumption of such Liabilities (the “Delayed Purchase Assets”)

in accordance with this Section 5.l(a)(ii)(A) as soon as reasonably practicable following the Closing.

     (5) Expenses of Purchase . Each of the purchase agreements giving effect to the purchase of Merck Contributed Non-U.S. Assets (whether concurrently with or after the Closing) shall provide that all of the costs and expenses associated with such purchase (other than the specified consideration for such purchase), including the costs and expenses of counsel and other advisors, and all registration, transfer or stamp duties and other comparable duties and Taxes, but excluding any allocation for salaries, shall be paid by the seller (Merck or a Merck Subsidiary, as the case may be), and that to the extent any of such costs or expenses has been incurred by the purchaser or any of its Affiliates (Merial or a Merial Subsidiary, as the case may be), the seller shall indemnify the payor thereof for such costs or expenses.

     (B) Merck Cash Contribution Amount . Merck shall, on or prior to the Closing Date, contribute cash to Merck Transitory LLC in an amount (the “Merck Cash Contribution Amount”) equal to the amount, if any, by which the Merck Non-U.S. Net Assets Value exceeds the “Merck Estimated Available Contributed Debt”, as defined below. The “Merck Estimated Available Contributed Debt” shall be the amount equal to [*] (the “Merck Negotiated Debt”) plus an estimate of the “Merck Closing Cash” (as defined below) less the sum of (w) an estimate of the “Merck Accrued Tax Liabilities” (as defined below), (x) an estimate of the “Merck Other Debt” (as defined below), (y) the value of the Retained Receivables (as defined in Section 5.1(a)(ii)(C)) and (z) the value of the Retained Inventory (as defined in Section 5.1(a)(ii)(C)).

     The “Merck Closing Cash” shall be equal to the cash and the fair market value of cash equivalent items that are included in the Merck

Contributed Assets, but shall exclude the Merck Asset Sale Proceeds, as defined in Section 10.9(a).

     The “Merck Accrued Tax Liabilities” shall be the amount equal to the net (after netting the payables and the receivables) accrued Liabilities for Taxes (excluding deferred Taxes) to the extent they are Merck Contributed Liabilities at the Closing Date.

     The “Merck Other Debt” shall be the amount of Debt at the Closing assumed or otherwise payable by Merck Transitory LLC, Merial or any Merial Subsidiary (without duplication) in favor of Merck (or another Merck Company designated by Merck) or the Debt payable to a Third Party assumed from a Merck Company or owed at the Closing by any Merck Transferred Subsidiary, other than the amount of Debt consisting of the promissory notes (the “Purchase Promissory Notes”) issued by Merial or the appropriate Merial Subsidiaries to purchase Merck Contributed Non-U.S. Assets, the Retained Receivables and the Retained Inventory pursuant to Sections 5.1(a)(ii)(A)(3), 5.1(a)(ii)(C)(l) or 5.1(a)(ii)(C)(2), respectively.

     (C) Retained Receivables and Retained Inventory .

     (1) Retained Receivables . Merck may (in its sole discretion) elect to retain (i.e. , not contribute as part of the Merck Contributed U.S. Assets) certain of its Receivables (the “Retained Receivables”) selected by it from among the Receivables that are part of the Merck Contributed U.S. Assets, at face value. To the extent Merck elects to retain Retained Receivables: Merck shall deliver to RP at the Closing a list of the Retained Receivables, which list shall include a description in reasonable detail including the face amount of each such Retained Receivable. Merck shall use commercially reasonable efforts to collect all Retained Receivables within ninety (90) days following the Closing Date. After such

ninety (90) day period, Merck shall furnish to Merial a list of all Retained Receivables that remain uncollected, together with all information and supporting documentation which Merck has for each such uncollected Retained Receivable; and Merial shall within five (5) Business Days of receiving such list, information and documentation, purchase all such outstanding Retained Receivables from Merck at the face amount thereof (calculated in U.S.$ at the closing midpoint exchange rates quoted by the London edition of the Financial Times on the Closing Date). Such purchase shall be made, at Merial’s option, with cash and/or with promissory notes issued to the seller.

     (2) Retained Inventory. Merck may (in its sole discretion) elect to retain (i.e. , not contribute as part of the Merck Contributed U.S. Assets) certain of its finished goods Inventory (the “Retained Inventory”) selected by it from among the finished goods Inventory of the Merck Contributed U.S. Assets. To the extent Merck elects to retain any Retained Inventory, Merck shall deliver to RP at the Closing a list of the Retained Inventory, which list shall include a description in reasonable detail including a breakdown of the value of such Retained Inventory. For purposes of calculation in this Section 5.1(a), the value attributed to the Retained Inventory shall be calculated in accordance with the Merck Manufacturing Supply Price Formula. On the Closing Date, Merial shall purchase the Retained Inventory from Merck with promissory notes at a fair market value price that to the extent possible excludes any intercompany (between Merck Companies) margin already included in the book value for such Inventories as recorded in the accounts of the selling Merck Company, except for the markup on standard cost and the adjustment provided for in the Merck Negotiated Supply Price. To the extent the Inventories cannot be purchased at a fair market value price that excludes any such margin, the Parties shall

use commercially reasonable efforts and negotiate in good faith to find and give effect to a solution (which will not include taking actions that would reduce Merck’s net income below that which Merck would realize if such Inventories were sold at a price calculated according to the Merck Negotiated Supply Price) that will eliminate the effect of the purchase of such Retained Inventory at a price that includes such margin on the net income of RP. To the extent the price at which the Merial Venture ultimately purchases the Retained Inventory exceeds the Merck Negotiated Supply Price, such excess shall be included in the calculation of the Supply Price Adjustment Special Dividend, pursuant to Section 6.7.

     (D) Non-Contributed Subsidiaries . The Parties hereby agree that none of Merck’s interests in Johnson & Johnson MSD Consumer Pharmaceuticals (formerly Centra Healthcare (U.K.)) or Blue Jay CV (Holland) shall be contributed to the Merial Venture. Merck shall defend, indemnify and hold harmless the Merial Venture and (only to the extent RP and its Subsidiaries suffer Damages separate and distinct from Damages suffered by the Merial Venture) RP and its Subsidiaries from and against any and all Damages incurred by the Merial Venture or RP and its Subsidiaries arising out of, based upon or resulting from an action or claim brought by a Third Party to the extent arising out of, based upon or resulting from the past, present or future operations of Johnson & Johnson MSD Consumer Pharmaceuticals (formerly Centra Healthcare (U.K.)) or Blue Jay CV (Holland).

     (E) Delayed Purchase Assets . Pending the purchase and sale of a Delayed Purchase Asset and the assumption of the Merck Contributed Liabilities reasonably attributable thereto in accordance with Section 5.1(a)(ii)(A) (collectively, a “Delayed Transfer”):

     (1) Merck shall (or shall cause the relevant Merck Subsidiary to) hold all benefits of such Delayed Purchase Assets to the extent related to the Merial Venture Business as agent for the Merial Venture and promptly pay to Merial (or a Merial Subsidiary that is the expected purchaser of such assets as designated by Merial) without any deduction, set-off or counterclaim, any and all net sums (after netting any amounts contemplated by clause (2) below to the extent not previously paid or reimbursed by the Merial Venture) received by the Merck Company on account of the operation of such Assets; and

     (2) Merial shall (or shall cause the relevant Merial Subsidiary to) (at the Merial Venture’s own cost and for its own account) pay, perform, fulfill and discharge when due all of the Liabilities, costs, expenses and obligations suffered or incurred by Merck or any of its Subsidiaries in respect of the ownership or operation of such Delayed Purchase Asset from the Closing Date until the Delayed Transfer of such Delayed Purchase Asset; provided , however , that Merck (or the relevant Merck Subsidiary) shall be responsible for any Damages payable to a Third Party to the extent such Damages result from Merck’s or any of its Subsidiaries’ negligence, recklessness or willful misconduct in the operation of such Delayed Purchase Asset, which negligence, recklessness or willful misconduct occurred prior to the Delayed Transfer of such Delayed Purchase Asset.

     No effect shall be given to clauses (i) or (ii) above if and to the extent that there is a significant risk that such arrangements would not be in material compliance with applicable Laws if effect were given thereto, in which case the principles set forth in clause (y) of Section 5.1(a)(ii)(A)(4) shall apply, and the Principals and Merial shall cooperate to seek an alternative solution designed to provide the Merial Venture with the

     material benefits (or the substantial equivalent of the benefits of) such Assets and Liabilities.

     (iii)  British United Turkeys, Ltd (“BUT”) (A) Merck shall, subject to the condition specified in (B) immediately below, assign, transfer, convey and deliver to Merck Transitory LLC the entirety of the share capital of BUT; provided , however , that (B) if, as a result of implementing the “BUT Steps”, as defined below, any Merck Company would or would be reasonably likely to recognize taxable gain in excess of [*] with respect to the BUT Steps under the terms of (aa) any amendment to Code § 355 and/or the Treasury Regulations thereunder adopted on or after the date hereof and prior to the Closing, (bb) any proposal of any such legislation or Treasury Regulations made since January 1, 1997, or (cc) any official notice or pronouncement with respect thereto made since January 1, 1997, in the case of any of (aa), (bb) and (cc), indicating that such amendment would have an effective date that would make it applicable to the BUT Steps, the Parties agree that BUT will be transferred directly to Merial by Merck Sharp & Dohme (Holdings) Limited in return for an issue of fixed-rate preference shares (the “Preference Shares”) with a face amount of [*]. The Parties acknowledge that, in either case, BUT shall not be treated as part of the Merck Contributed Non-U.S. Assets pursuant to clause (ii) above. The Parties further agree that, if Merial issues such Preference Shares to Merck Sharp & Dohme (Holdings) Limited, Merial will issue Preference Shares with a face amount of [*] to IM in consideration for IM’s contribution to Merial hereunder of shares of RM with a fair market value equal to the fair market value of the Preference Shares received. The Parties agree that, after said issue, and all other Closing Date share transactions and events, each Principal shall own, directly or indirectly, exactly the same general ownership interest and Preference Share interest in Merial.

     For purposes of this Section 5.1(a)(iii), the “BUT Steps” shall mean all or any part of the following: the distribution of the shares of BUT by its shareholder(s), followed by additional distribution to shareholders, followed by a

contribution of the shares of BUT to Merck Transitory LLC, followed by the merger of Merck Transitory LLC with and into Merial. Whether any Merck Company would or would be reasonably likely to recognize taxable gain in excess of [*] with respect to the BUT Steps shall be determined in the good faith judgment of Merck, after having provided to RP all material and relevant information which is reasonably available to Merck.

     If Preference Shares are issued pursuant to clause 5.1(a)(iii)(B) above, the Preference Shares shall remain outstanding in perpetuity (unless and until Merial is liquidated). The Preference Shares shall be entitled to an annual dividend per share such that the aggregate outstanding Preference Shares shall be entitled to an annual dividend of: [*], which shall be paid out of Distributable Profits for each Fiscal Year remaining after payment of the Net Special Dividend, as provided in Section 6.2, and which dividend shall be cumulative (but shall be paid in any event after payment of the Net Special Dividend, as provided in Section 6.2). The Preference Shares shall have the liquidation rights specified in Section 6.11. The Preference Shares shall not be entitled to any voting rights, except any voting rights which are required under applicable Laws. The Preference Shares shall not be transferable, except in connection with a Transfer of a Member’s entire Merial Venture Interest in accordance with Article XVII hereof. The Association Documents shall be modified to the extent reasonably necessary or appropriate to implement this Section 5.1(a)(iii).

     (b)  RP Contribution . On the terms and subject to the conditions of this Agreement (and subject specifically to the representations, warranties and covenants made by RP, IM and RM in this Agreement) and the RP Transfer Agreement, and subject to subsections (i), (ii) and (iii) below, IM shall, on or prior to the Closing Date, assign, transfer, convey and deliver to Merial or cause to be assigned, transferred, conveyed and delivered to Merial, the entirety of the share capital of RM, together with all of RM’s direct and indirect ownership interests in each of its Subsidiaries as set forth in Schedule 2-11 hereto. As a consequence, and without limitation, Subsidiaries of Merial

shall thereby be obligated to pay, perform, fulfill and discharge when due all of the RM Contributed Liabilities.

     (i) Goubin . The Parties intend that Goubin shall be sold either (x) by the Merial Venture, in which case Merial shall (and shall procure that the other Merial Venture Companies shall) cooperate with RP and provide any information or assistance reasonably requested by RP to find a purchaser for Goubin, or (y) by RP, should RP exercise its call option described in (B) below.

     (A) Goubin Operations Pending Sale . RP hereby represents, as of the date hereof and as of the Closing Date, to Merck, Merck SH and Merial that, since December 31, 1996, Goubin has been operated in the ordinary course of business (including capital expenditures made in accordance with approved programs) consistent with past practice and there has not been any material change in the assets or Liabilities of Goubin (other than the payment of dividends and such approved programs of capital expenditures), including any material contribution of assets by RM or ISA of any kind to Goubin, as compared with the balance sheet of Goubin as of December 31, 1996 set forth in Schedule 5.1B-1. For purposes of this Section 5.1(b)(i), a “material” contribution of assets means a contribution of assets in excess of [*]. Merial covenants that, as of the Closing Date and until the second anniversary of the Closing Date, or the sale of Goubin if earlier, it shall not cause Goubin to take any action that is outside the ordinary course of business consistent with past practice and shall not cause Goubin to incur any additional Debt, except in the ordinary course of business, as compared with the Debt of Goubin as of the Closing Date, provided that Merial may, upon RP’s request and subject to the consent of Merck (which consent shall not be unreasonably withheld), cause an action out of the ordinary course to be taken or a material contribution of assets to be made if necessary to facilitate the sale of Goubin. RP shall indemnify the Merial Venture for any costs and expenses incurred by the Merial Venture in connection with, and shall defend,

indemnify and hold harmless the Merial Venture for any Damages incurred by the Merial Venture as a result of, any such action and/or material contribution. RP shall also defend, indemnify and hold harmless the Merial Venture for any and all Damages (but not for any capital accounting loss recorded by the Merial Venture in selling Goubin in accordance with this Section 5.1(b)(i)) arising out of the operation or condition of Goubin before the earlier of (x) the sale of Goubin and (y) the second anniversary of the Closing Date (except for any such Damages payable to a Third Party other than the purchaser (or its Affiliates) of Goubin, to the extent resulting from the negligence, recklessness or willful misconduct of the Merial Venture, including that of the management of Goubin).

     (B) Purchaser and Timing of Goubin Sale .

     (1) At any time on or prior to the second anniversary of the Closing Date, if a firm offer to purchase Goubin is received from a Third Party (which may include the employees of Goubin) at a price that is acceptable to RP and that is greater than or equal to the Goubin Book Value at the Closing Date plus any amounts contributed by any other Merial Venture Company to Goubin pursuant to Section 5.1(b)(i) that have not been reimbursed by RP, less the sum of [*] (translated into FF at the closing midpoint exchange rate indicated in the London edition of the Financial Times on the Closing Date) and all the dividends paid by Goubin to any other Merial Venture Company between the Closing Date and the date when such offer is received, then the Merial Venture shall sell Goubin to such purchaser.

     (2) At any time on or prior to the second anniversary of the Closing Date, RP shall have the option to purchase Goubin from the Merial Venture for an amount equal to the Goubin Book Value at the Closing Date plus any amounts contributed by any other Merial Venture Company to Goubin pursuant to Section 5.1(b)(i) that have not been reimbursed by RP,

less the sum of [*] (translated into FF at the closing midpoint exchange rate indicated in the London edition of the Financial Times on the Closing Date) and all the dividends paid by Goubin to any other Merial Venture Company between the Closing and the exercise by RP of its call option. If such purchase results in a capital loss to the Merial Venture, RP shall not sell Goubin to a Third Party at a profit (to the RP Group) for a period of six months after the exercise of such option. For the avoidance of doubt, the Parties understand that the ownership by RP and the operation of the current business of Goubin in accordance with this Section 5.1(b)(i) is not within the scope of the Animal Health Business or the Poultry Genetics Business and is therefore not subject to the non-competition provisions set forth in Article XV.

     (3) On or within two Business Days after the second anniversary of the Closing Date, if Goubin has not been sold to a Third Party or RP as provided in (1) or (2) above, then Merck will have the option, which it may exercise in its own discretion (by notice to RP and Merial sent at any time prior to the end of the second Business Day after the second anniversary of the Closing Date, which notice may be conditioned upon the transactions in (1) or (2) above occurring or not occurring) and will be binding on both Merial and RP, to require Merial (or the Merial Venture Company that owns Goubin) to sell Goubin to RP for an amount equal to the Goubin Book Value at Closing Date plus any amounts contributed by any other Merial Venture Company to Goubin pursuant to Section 5.1(b)(i) that have not been reimbursed by RP, less the sum of [*] (translated into FF at the closing midpoint exchange rate indicated in the London edition of the Financial Times on the Closing Date) and all the dividends distributed by Goubin to any other Merial Venture Company during the two year plus two Business Day period following the Closing Date. If Merck does not exercise this put option, Goubin shall continue as an integral part of the Merial Venture Business after two years and the

indemnification obligations of RP under this Section 5.1(b)(i) in connection with the sale of Goubin shall terminate.

     (C) Goubin Sale for RP’s Account .

     (1) Special Dividend to RP . In the case of the sale of Goubin pursuant to (B) above, Merial shall credit to the RP Member in respect of the year in which the sale of Goubin occurs a Special Dividend equal to the cash (or the fair market cash equivalent of any non-cash proceeds) received by the Merial Venture (whether from a Third Party purchaser or from RP) for the sale of Goubin, less any costs, expenses or Damages (including Taxes, fees and registration fees) incurred by the Merial Venture in connection with such sale.

     (2) Purchase Agreement, etc . The sale of Goubin shall be by means of the sale of its entire capital stock, the sale of all its assets subject to all its Liabilities, or any substantially similar transaction; provided , however , that if the Principals agree to a partial sale of Goubin, they shall adjust the mechanism set forth in this Section 5.1(b)(i) as they deem appropriate. Any sale of Goubin shall be without any recourse against the Merial Venture except as to title matters and except as to any Damages payable to a Third Party other than the purchaser (or its affiliates) of Goubin to the extent resulting from the negligence, recklessness or willful misconduct of the Merial Venture, including of the management of Goubin. Subject to the following sentence, all Damages, Liabilities and contingencies associated with a sale of Goubin pursuant to this Section 5.1(b)(i) above suffered or incurred by Merck, Merial and their respective Subsidiaries shall be for the account of RP. RP shall (and no Merial Venture Company shall), in any contract for the sale of Goubin to a Third Party purchaser, undertake to indemnify the purchaser thereof for all breaches of representations, warranties or covenants in such contract related to Goubin and its sale; provided that RP shall have approved all of

such representations, warranties and covenants prior to the contract being concluded; and further provided that Merial shall indemnify RP for any Damages owed to such Third Party purchaser of Goubin to the extent arising from Damages payable to a Third Party other than the purchaser (or its Affiliates) of Goubin to the extent resulting from the negligence, recklessness or willful misconduct of the Merial Venture, including of the management of Goubin. Except to the extent Merial has an obligation to indemnify RP pursuant to the preceding sentence, RP shall defend, indemnify and hold harmless the Merial Venture and (to the extent they suffer any Damages distinct from those suffered by the Merial Venture) Merck and its Subsidiaries for all Damages suffered or incurred by the Merial Venture or Merck and its Subsidiaries arising out of, based upon or resulting from such sale.

     The “Goubin Book Value” at any date shall equal the book value of Goubin on such date in the accounts of ISA, determined according to U.S. GAAP applied consistently with the principles used to calculate Goubin’s book value in the December 31, 1996 balance sheet of ISA. RP represents and warrants that the insurance claim made by Goubin with respect to damages in connection with a fire at a hatchway in Plougenast ([*]) was finally resolved and paid to Goubin prior to the date of this Agreement.

     (ii) Certain RM Liabilities and Receivables Excluded . Notwithstanding Sections 5.1(b) and (c), RM shall, prior to the Closing, (A) assign to RP (or another RP Company designated by RP), and RP shall assume and pay, perform and discharge when due, the payable to Sanofi of RM, which is described on Schedule 5.1B-2 (the “Sanofi Payable”), and (B) assign to RP (or another RP Company designated by RP) the related financial receivable of RM due by RM’s unconsolidated Subsidiary Rhône Mérieux Animal Health Company Ltd. (China) (“RM China”), which is described in Schedule 5.1B-2 (the “RM China Financial Receivable”). In addition, as from the Closing Date, RP (or another RP Company designated by RP) will be entitled to an amount equal to the difference between

the Sanofi Payable and the RM China Financial Receivable as of the Closing Date ([*]), which amount will be paid by RM China to RP over time only from and to the extent of the proceeds of specific assets that are part of the current assets held by RM China as of the Closing Date (the “RP Chinese Assets”). The RP Chinese Assets shall consist of specific trade receivables, Inventories and/or other current assets each as existing on the Closing Date in the books of RM China. At the Closing, RM shall provide Merck with a list and description in reasonable detail (including book value) of the RP Chinese Assets. The aggregate book value of the RP Chinese Assets shall be equal to or less than the difference between the Sanofi Payable and the RM China Financial Receivable. The Parties acknowledge that the RP Chinese Assets are specifically allocated to the reimbursement of RP and that each time any of the RP Chinese Assets is sold for cash or collected for cash by RM China, the net proceeds of such asset will be used promptly upon their being received to reimburse RP to the extent provided in this Section 5.1(b)(ii). The Parties understand that the only obligation of RM China is to sell or collect the RP Chinese Assets in the ordinary course of business, without any extraordinary sale or litigation and without recourse to, or any other obligation of, the Merial Venture. RP represents and agrees that, as indicated in Schedule 5.1B-2, at December 31, 1996, the amount outstanding under the RM China Financial Receivable is [*]. The Parties agree that such RM China Financial Receivable is deemed to be Debt. The Parties further agree that in the event the aggregate of the values of all the RP Chinese Assets as recorded in the books of RM China on the Closing Date is less than the amount equal to the difference between (x) the Sanofi Payable and (y) the RM China Financial Receivable, the amount (the “RP Chinese Assets Value Shortfall”) by which the book value of all the RP Chinese Assets is less than such difference shall become a Debt obligation payable by RM to RP and such amount shall be deemed to be Debt. The Parties agree that the proceeds collected with respect to each RP Chinese Asset that is paid to RP pursuant to this Section 5.1(b)(ii) shall not exceed the value of each such RP Chinese Asset as recorded in the books of RM China on the Closing Date.

     (iii) Central Biologics Inc. RM represents that (x) Select Laboratories, Inc., a Subsidiary of RM (“Select”), is currently in the process of acquiring Central Biologics Inc. (“Central Biologics”) for a purchase price of [*] (this acquisition being the “Central Biologics Acquisition”); and (y) as part of the Central Biologics Acquisition, [*]. The Parties hereby agree that both the Central Biologics Acquisition and the Central Biologics Consulting Agreement are entered into for the account of Merial. As a result, the Parties further agree that (aa) any Debt assumed by RM, Select or any other Subsidiary of RM to acquire Central Biologics, (bb) any cash or cash equivalents, if any, used by Select or any other Subsidiary of RM to acquire Central Biologics shall be added to the RM Closing Cash when determining the actual contributions of the Parties in accordance with Sections 5.3 and 6.8, (cc) any cash or cash equivalents included in Central Biologics upon completion of its acquisition by RM, Select, or any Subsidiary of RM shall be excluded from the RM Closing Cash, and (dd) any Debt included in Central Biologics upon completion of its acquisition by RM, Select or any other Subsidiary of RM, shall not be included in the RP Outstanding Debt.

     (c)  Contributed Assets Free of Debt . The Merck Contributed Assets, on the one hand, and RM and its Subsidiaries, on the other hand, shall be contributed to the Merial Venture together with the assumption of or the continued obligation for the Merck Contributed Liabilities and the RM Contributed Liabilities, respectively. Except as set forth in Section 5.2 or as provided for in Article VII, however, such respective contributions shall be free of (i) any related financial indebtedness (“Debt”), including any Liability, contingent or otherwise, for borrowed money, any obligations in respect of or evidenced by bonds, debentures, notes, letters of credit or similar instruments and any obligations under finance lease obligations (as defined by U.S. GAAP).

     (d)  Currency Exchange for Asset Contributions . The respective contributions of each Group to the Merial Venture shall be calculated in U.S. dollars as of the Closing

Date. The value of any contribution not denominated in U.S. dollars shall be converted into U.S. dollars at the closing midpoint exchange rate quoted by the London edition of the Financial Times on the Closing Date, or as otherwise agreed upon. Subject to Section 5.2(c), all other necessary currency conversions in respect of the value of the respective contributions (e.g., to English pounds sterling or French francs) shall also be based on the closing mid-point exchange rates quoted by the London edition of the Financial Times on the Closing Date, or as otherwise agreed upon.

SECTION 5.2 Debt Contributions

     (a)  Merck Debt Contribution . On the terms and subject to the conditions of this Agreement, Merial shall (or Merial shall, in accordance with the terms of this Agreement, cause one or more Subsidiaries of Merial to), on the Closing Date, assume on behalf of and/or in favor of Merck or a Merck Subsidiary, and shall pay, perform and discharge when due, all Liabilities related to the “Merck Contributed Debt”, as defined below. The “Merck Contributed Debt” shall consist of (and its aggregate amount shall be calculated by adding the amounts of): (i) the Purchase Promissory Notes, as defined in Section 5.1(a)(ii)(B), if any, (ii) the Merck Accrued Tax Liabilities, as defined in Section 5.1(a)(ii)(B), and (iii) the Merck Other Debt, as defined in Section 5.1(a)(ii)(B). The Purchase Promissory Notes shall be on substantially the same terms and conditions as the Merck Interim Financing described in Section 5.2(d) (except that the Purchase Promissory Notes shall not be subject to reborrowing to the extent repaid, i.e., not a revolving credit).

     (b)  RP Debt Contribution . On the terms and subject to the conditions of this Agreement, RM and its Subsidiaries shall, on the Closing Date, have Liability (the “RP Contributed Debt”) (i) for Debt consisting of (and its aggregate amount shall be calculated by adding the amounts of) the “RM Intercompany Debt” (as defined below), the “RM Outstanding Debt” (as defined below), the RM China Financial Receivable and the RP Chinese Assets Value Shortfall, if any, and (ii) for the “RM Accrued Tax Liabilities” (as defined below).

     The “RM Intercompany Debt” shall be RM’s estimate as of the Closing Date of the aggregate principal amount equal to: [*] (the “RP Negotiated Debt”) plus the estimated amount of “RM Closing Cash” (as defined below) and minus the estimated sum of ( A ) the “RM Outstanding Debt”, (B) the estimated net amount (after netting the payables and the receivables) equal to the accrued Liabilities for Taxes (excluding deferred Taxes) of RM and for RM Transferred Subsidiaries at the Closing Date (the “RM Accrued Tax Liabilities”), (C) the RM China Financial Receivable as described in Section 5.1(b)(ii), and (D) without duplication of (C), the RP Chinese Assets Value Shortfall (as defined in Section 5.1(b)(ii)). The RM Intercompany Debt shall not be subject to any covenants and shall be on substantially the same terms and conditions as the RP Interim Financing described in Section 5.2(d) (except that this Debt shall not be subject to reborrowing to the extent repaid, i.e., not a revolving credit).

     The “RM Outstanding Debt” shall consist of (x) the sum of the aggregate principal amount outstanding at Closing and any accrued unpaid interest or other amounts, calculated as of the Closing Date, in respect of the Debt owed by RM or its Subsidiaries to Third Parties as reflected on the December 31, 1996 balance sheet included in the RM Financials, and (y) without duplication of any Debt included in (x) above, any other Debt owed by RM or its Subsidiaries at the Closing Date less (without duplication) (aa) any Debt owed by Goubin on the Closing Date, (bb) any Debt incurred by RM, Select or any other Subsidiary of RM to pay for the Central Biologics Acquisition, and (cc) any Debt owed by Central Biologics on the Closing Date. RP shall obtain any consents or waivers required under the terms of the RM Outstanding Debt to give effect to the Transactions (so that the RM Outstanding Debt is not and does not become in default and does not give the counterparty to any of the RM Outstanding Debt any rights of termination, amendment, acceleration, suspension, revocation or cancellation) and RP shall pay any and all costs and expenses, including any increased interest expenses, penalties or charges, necessary to obtain such consents or waivers. Subject to the preceding sentence, the “RM Outstanding Debt” shall continue on its stated terms and conditions after the Closing.

     The “RM Closing Cash” shall be equal to the cash and the fair market value of cash equivalent items contributed by RM and its Subsidiaries to the Merial Venture, but shall exclude (aa) the RM Asset Sale Proceeds, as defined in Section 8.9(a), (bb) the cash and cash equivalents items owned by Goubin on the Closing Date, (cc) any cash and cash equivalent items owned by Central Biologics upon completion of its acquisition by RM, Select or any other Subsidiary of RM, and (dd) any proceeds from the Diagnostic Disposal.

     In the event Goubin is not sold pursuant to, and within the time periods specified in, Section 5.1(b)(i) and remains part of the Merial Venture, the Parties shall at such time negotiate in good faith to find and give effect to a solution that will take account of the Debt of, and the cash and cash equivalent items that were owned by, Goubin on the Closing Date.

     (c)  Currency Exchange for Contributed Debt . The currency exchange rates used to calculate the U.S. dollar value of any Merck Contributed Debt, Retained Receivables, Retained Inventory or RP Contributed Debt not denominated in U.S. dollars shall be the closing midpoint exchange rates quoted by the London edition of the Financial Times on the Closing Date, or as otherwise agreed between the Parties.

     (d)  Interim Financing . Both RP and Merck shall provide, or shall arrange with outside financial institutions to provide, the Merial Venture with a revolving working capital financing facility available when needed as from the Closing Date (the “RP Interim Financing” and the “Merck Interim Financing”, respectively), with a maximum aggregate principal amount to be outstanding from time to time of [*] for each such facility. Should Merial request an increase of the maximum aggregate principal amount of the RP Interim Financing and the Merck Interim Financing, RP and Merck agree to discuss in good faith the terms and conditions of any such increase and whether any such increase will be provided. The Parties agree that the RP Interim Financing shall not be included in, and shall be in addition to, the RP Contributed Debt and the Merck Interim Financing shall not be included in, and shall be in addition to, the Merck Contributed Debt. The RP Interim Financing and the Merck Interim Financing shall have

substantially equivalent terms and conditions, both be available through the earlier of December 15, 1997 and the date that is six (6) months after the Closing Date, at which earlier date all amounts outstanding thereunder shall be due and payable, and bear interest at the [*] in which the advances that are part of the interim financing are made [*]. Merial shall use commercially reasonable efforts to establish its own financing as soon as practicable after the Closing to be used, first, to repay the RP Contributed Debt and the Merck Contributed Debt, second, to repay the RP Interim Financing and the Merck Interim Financing, with the RP Interim Financing and the Merck Interim Financing being repaid simultaneously on the same terms and conditions and, third, for other purpose of the Merial Venture Business. The Principals shall meet before the Closing to determine further terms and conditions of the RP Interim Financing and the Merck Interim Financing.

SECTION 5.3. Preparation and Audit of Closing Balance Sheets

     (a)  Preparation of Closing Balance Sheets — General. As soon as possible after the Closing Date, and in no event more than thirty (30) Days after the Closing Date, each of RM and Merck shall prepare and deliver to each other a consolidated balance sheet (the “RM Closing Balance Sheet” and the “Merck Closing Balance Sheet”, respectively, and, collectively, the “Closing Balance Sheets”) for RM and the Merck Contributed Business, respectively. These balance sheets shall include as special purpose line items (i) the RM Closing Cash and the Merck Closing Cash, (ii) the RM Intercompany Debt, the RM Outstanding Debt, the RM China Financial Receivable, the RP Chinese Assets Value Shortfall and the Merck Other Debt, and (iii) the RM Accrued Tax Liabilities and the Merck Accrued Tax Liabilities. The RM Intercompany Debt, the RM Outstanding Debt, the RM China Financial Receivable, the RP Chinese Assets Value Shortfall, the RM Accrued Tax Liabilities and the RM Closing Cash shall be used to calculate the “RM Actual Contributed Net Debt Variance” and the “Contributed Debt Adjustment Special Dividend”, both as defined in Section 6.8 below. The Merck Accrued Tax Liabilities, the Merck Other Debt and the Merck Closing Cash shall be used to calculate the “Merck Actual Contributed Net Debt Variance” and the “Contributed Debt Adjustment Special Dividend”, both as defined in Section 6.8 below. Merck shall also provide RP with a list

of all Delayed Purchase Assets, which list shall include a description in reasonable detail of all such Delayed Purchase Assets and an estimate of the fair market value of all the Delayed Purchase Assets on an aggregate basis.

     (b)  Audit of Closing Balance Sheets and Retroactive Closing Financial Statements . As soon as possible after the preparation of the Closing Balance Sheets and the Retroactive Closing Financial Statements, as defined in Section 6.3, Merck shall send the Merck Closing Balance Sheet and the Merck Retroactive Closing Financial Statements to its accounting firm and to RM, and RM shall send the RM Closing Balance Sheet and the RM Retroactive Closing Financial Statements to its accounting firm and to Merck. Each of RM’s and Merck’s accounting firms shall promptly be provided with any relevant financial data they may reasonably request. Each of RM’s and Merck’s accounting firms shall have a maximum of sixty (60) days to conduct an audit of the Closing Balance Sheets and the Retroactive Closing Financial Statements of their respective client, which audit shall include, among other things, (x) an audit of the Debt and the cash and the cash equivalent items contributed by each Party to the Merial Venture, (y) at the request and expense of RP, an analysis of whether or not all the Merck Contributed Assets are fairly reflected in all material respects in the Merck Closing Balance Sheet and, to the extent not included therein, have been specified by Merck to RP as Delayed Purchase Assets, and (z) an audit of the Retroactive Closing adjustments to ensure such adjustments have been calculated in accordance with the provisions set forth in Section 6.3 and in Exhibit XIX.

     As soon as possible, and in no event more than sixty (60) days after being sent the Closing Balance Sheets and the Retroactive Closing Financial Statements, each of RM’s and Merck’s accounting firms shall make available to the other their working papers, reports and comments on the Closing Balance Sheets and the Retroactive Closing Financial Statements. In the event there are any disagreements, the Parties will then have twenty (20) Business Days to agree on the changes to be made to the Closing Balance Sheets and/or the Retroactive Closing Financial Statements and resolve any disputes arising between them. In the event there is any unresolved dispute at the end of this twenty (20) Business Day period, the Parties will jointly submit such unresolved disputes

to the Board of Directors. The Board of Directors shall then have ten (10) Business Days to resolve such disputes. In the event there are any unresolved disputes at the end of this further ten (10) Business Day period, the Board of Directors shall have five (5) Business Days to engage a “Big Six” accounting firm to resolve any such dispute, except that (i) if the Board of Directors cannot reach agreement on the selection of such accounting firm, then such accounting firm shall be selected and appointed by the ICE (which selection and appointment shall be final and binding on the Board of Directors and on the Principals) and (ii) the firm so selected and appointed may not be the primary accounting firm for Merck, RP, RM or Merial. Each of the Principals shall submit to the selected accounting firm their detailed calculations and such firm shall promptly be provided with any relevant financial data that it may request. The selected accounting firm shall act as expert and shall have twenty (20) Business Days to resolve all the disputes, and such resolution shall be final and binding on the Parties and the Board of Directors. The fees and reasonable expenses of the selected accounting firm shall be split equally between Merck and RP.

SECTION 5.4. Alternative Tax Structuring and Tax Planning

     (a)  Changes in Law . With respect to Merial or any other Merial Venture Company, if, due to any change or proposed change in applicable Law (including, without limitation, actions of any Public Authority) after the Closing, the continuation of the structure described in Section 1.3 and Article III entails (or, in the case of a proposed change, would, if enacted, entail) materially adverse tax or other legal consequences to a Principal or its Affiliates, or a significant risk thereof, at the request of such Principal the Parties shall use commercially reasonable efforts to agree on an appropriate alternative structure that will be designed, to the extent possible, to minimize such adverse consequences to the requesting Principal and its Affiliates but have no less favorable economic, commercial and legal characteristics to the other Principal and its Affiliates as the structure described elsewhere in this Agreement and the Ancillary Agreements.

     (b)  Restructurings to Minimize Taxes .

     (i)  General . Each Party shall bear the tax consequences of its transfers to the Merial Venture and (unless otherwise agreed in writing) the performance of its obligations under this Agreement and any and all Ancillary Agreements to which it is a party or by which it is bound. [*].

     (ii)  Alternative Contribution of Merck Contributed Non-U.S. Assets . Without limiting the generality of Section 5.4(b)(ii) and notwithstanding the provisions of Sections 1.3(a)(i)(B), 1.3(c), and 5.1, and subject to the conditions set forth in (t), (u), (v), (w), (x), (y) and (z) below, Merck may elect to exclude from the Non-U. S. Merck Contributed Assets to be sold to the Merial Venture and/or from the Merck Contributed Liabilities reasonably attributable thereto assumed by the Merial Venture, certain of such assets and Liabilities [*], provided that (t) intangible assets included in the Merck Contributed Assets may not be so excluded, (u) Merck identifies in reasonable detail in writing to RP on or prior to the Closing Date such assets and/or liabilities; (v) an arrangement with respect to such assets and/or liabilities is entered into among the Parties or their Affiliates and/or other adjustments are made to the terms and conditions of the transactions contemplated by this

Agreement so that they have, in the aggregate, no less favorable economic, commercial and legal characteristics to RP, the Merial Venture and their respective Affiliates as the structure described elsewhere in this Agreement; (w) RP consents in writing to this alternative prior to its implementation (which consent shall not be unreasonably withheld or unreasonably delayed if, in RP’s reasonable opinion, all the other conditions specified in this clause (ii) have been satisfied); (x) [*]; (y) Merck shall be responsible for all out-of-pocket costs and fees reasonably incurred by RP or any of its Subsidiaries in assessing the alternative structure proposed by Merck pursuant to this clause (ii); and (z) no such alternative structure shall be proposed if such alternative structure would result in such assets and/or Liabilities being transferred to the Merial Venture after December 31, 1997.

     (iii) Except as provided elsewhere in this Agreement or in the Ancillary Agreements, each Party and its Affiliates will, however, ultimately be responsible for its own Taxes.

SECTION 5.5 . Certain U.S. Tax Matters

     (a)  Designation of Tax Matters Partner . The Merck Member is hereby designated as the “Tax Matters Partner” under Section 6231(a)(7) of the Code to manage the administrative Tax proceedings conducted at the Merial Venture level by the IRS with respect to Merial Venture matters. The Merck Member is specifically directed and authorized to take whatever steps the Merck Member, in its sole discretion, deems necessary or desirable to assure the Merck Member’s designation as the Tax Matters Partner, including, without limitation, filing any forms or documents with the IRS and taking such other action as may from time to time be required under Treasury Regulations. Expenses of administrative proceedings relating to the determination of Merial Venture items at the Merial Venture level undertaken by the Merck Member in accordance with this Section 5.5 will be deemed to be Merial Venture expenses.

     (b)  Tax Elections . All Tax elections required or permitted to be made under the Code and any applicable U.S. federal, state or local Tax law with respect to the Merial Venture (or any of its Subsidiaries) shall be made by the Tax Matters Partner, subject to the express prior written approval of the RP Member, which approval shall not be unreasonably withheld, and any decision with respect to the treatment of Merial Venture transactions on the Merial Venture’s U.S. federal, state or local Tax Returns shall be made by the Members jointly. The RP Member hereby approves the election to classify Merial as a partnership for U.S. Tax purposes, as well as any other election to classify any other Merial Venture Company (other than BUT) which is an eligible entity as either a partnership or branch, as the case may be; provided that no such election shall result in increased Tax Liabilities or exposure for RP; and further provided that no such election shall require any restructuring of or other company action affecting any such Merial Venture Company. The RP Member also hereby approves any action the Tax Matters Partner may deem necessary in its sole discretion to give effect to any election approved pursuant to the preceding sentence. RP will (or cause its Subsidiaries to) provide to the Tax Matters Partner and sign all documents necessary to give effect to all elections to be made pursuant to this Section 5.5(b).

     (c)  Allocations of Income, Gain or Loss

     (i) Net Income . For U.S. Tax purposes, net income with respect to any taxable period shall be allocated as follows:

     (A) First, to the Members in proportion to the excess, if any, of (i) the cumulative amount paid to each Member pursuant to Section 6.2 through the date the Net Special Dividend is calculated after the closing of such period in respect of such period, over (ii) the cumulative amount previously allocated to such Member in respect of such period pursuant to this paragraph (A) until such excess has been eliminated;

     (B) Second, to the holders of any Preference Shares (if issued pursuant to Section 5.1(a)(iii)), proportionately, in an amount equal to the

amount, if any, of dividends paid thereon during such period (whether such dividends represent payment of a current or accumulated dividend thereon); and

     (C) Third, 50% to each of the Members, as set forth in Section 6.1 hereof.

     (ii) Net Loss . For Tax purposes, net loss with respect to any taxable period shall be allocated 50% to each of the Members, as set forth in Section 6.1 hereof.

     (iii) Tax Adjustments . In the event that the Merial Venture’s income, gains, losses, deductions or credits are adjusted by any Taxing Authority by reason of any transaction between one or more Members and/or the Merial Venture, including adjustments pursuant to Section 482 of the Code or similar provisions under state, local or foreign law (any such adjustment herein being referred to as a “Tax Adjustment”), the allocation of any item of gross income, gain, loss, deduction or credit resulting from such Tax Adjustment (either as the result of a primary or correlative adjustment) and the treatment of any deemed transfers of value between or among the Merial Venture and one or more Members (including deemed contributions to and deemed distributions from the Merial Venture on account of such Tax Adjustment) shall be governed by this Agreement. Allocations, including allocations of items of gross income and the treatment of deemed transfers of value between or among the Merial Venture and the Members shall be made, to the extent possible, in an appropriate manner by the Tax Matters Partner so as to avoid any Tax consequences from a Tax Adjustment to a Member who is not affected by such Tax Adjustment. In the event that any Tax Adjustment results in an increase in the Merial Venture’s gross income, such gross income shall be allocated as an item of gross income under Code Section 702(a)(7) to the Member whose income is adjusted in connection with such Tax Adjustment to the Merial Venture’s income and the Merial Venture shall be treated as making a deemed transfer of value that is treated as a distribution to such Member in the

same amount. In the event that any Tax Adjustment results in an increase in an item of Merial Venture deduction or loss, such deduction or loss shall be allocated as an item of deduction under Code Section 702(a)(7) to the Member whose income is adjusted in connection with such Tax Adjustment to the Merial Venture’s income and such Member shall be treated as making in the same amount a deemed transfer of value that is treated as a contribution to the Merial Venture. In the case of a deemed transfer of value by the Merial Venture to a Member that is treated as a guaranteed payment as a result of a Tax Adjustment that reduces an item of the Merial Venture’s loss or deduction, the deduction attributable to such guaranteed payment shall be allocated in the same manner the item of loss or deduction reduced by the Tax Adjustment was allocated.

     (d)  Capital Accounts . A separate capital account shall be established and maintained for each Member. Maintenance of capital accounts is intended for U.S. Tax reporting purposes only and has no application to any other provision of this Agreement or the interpretation thereof.

     (i) The initial balance of each capital account shall be zero.

     (ii) The capital account of each Member shall be increased by (x) any capital contribution by such Member when such capital contribution is made and (y) the net income allocated to such Member pursuant to Section 5.5(c)(i).

     (iii) The capital account of each Member shall be reduced by (x) the amount of any distribution of cash or the fair market value of any property (net of any liability secured by such property that the Member is considered to assume or take subject to under Section 752 of the Code) distributed to such Member when such distribution is made and (y) the net loss allocated to such Member pursuant to Section 5.5(c)(ii).

     (iv) The capital account of each Member shall be adjusted to reflect any adjustment to the value of the Merial Venture’s assets attributable to the

application of Sections 732, 734 or 743 to the extent required pursuant to Treas. Reg. § 1.704-1(b)(2)(iv)(m).

     (v) Except as otherwise provided in this Agreement, whenever it is necessary to determine the capital account of any Member, the capital account of such Member shall be determined after giving effect to the allocations of net profit, net loss and other items realized prior or concurrent to such time (including, without limitation any net profits and net losses attributable to adjustments to values with respect to any concurrent distribution), and all contributions and distributions made prior or concurrent to the time as of which such determination is to be made.

     (vi) No Principal or Member shall have any obligation to Merial or any Merial Venture Company, the other Principal, the other Member or to any other Person, including, without limitation, any creditors of the Merial Venture, to restore or otherwise make good any negative balance in any Member’s capital account.

     (vii) Distributions in liquidation of the Merial Venture shall be made in accordance with capital accounts; [*].

     (e)  Certain Tax Benefits . For U.S. federal Tax purposes, the Principals, the Members and Merial agree (and Merial agrees to cause the Merial Venture Companies) to treat the prices charged to the Merial Venture for products purchased under the Merck Supply Agreement and the RP Ag Supply Agreement as the Merial Venture’s “cost” therefor. In furtherance thereof, the Principals, the Members and Merial agree (and Merial agrees to cause the Merial Venture Companies to agree) that any benefits derived under Section 936 of the Code or any successor Code section thereof by Merck Member or any Affiliate of Merck Member on the manufacture of any products sold to the Merial

Venture pursuant to the Merck Supply Agreement shall be for the benefit of Merck Member and not for the benefit of the Merial Venture, the RP Member nor any other member of the RP Group.

ARTICLE VI

PROFIT AND LOSS ALLOCATIONS; DIVIDENDS

SECTION 6.1. General Profit and Loss Principles

     As a general principle, the Parties have agreed that the profits and losses of the Merial Venture shall be allocated to the Members in such a way that each Member will be entitled to 50.0% of the profits and losses of the Merial Venture, subject to the specific adjustments set forth in this Agreement and to such other adjustments as the Members’ Meeting may determine.

     For accounting purposes only and for no other purpose, the Members intend that, for each accounting period, each Member’s share of Merial’s net income will include fifty percent (50%) of Merial’s net income (after subtracting Net Special Dividends and dividends on Preference Shares) plus any Net Special Dividends and dividends on Preference Shares made to that Member that may be income or expense to such Member.

SECTION 6.2. Special Dividends

     (a)  Special Dividends Generally. The Parties have agreed to certain financial arrangements that shall be exceptions to the general principle set forth in Section 6.1 of a 50/50 allocation of profits as between the Members. Certain of these financial arrangements (set forth in Sections 5.1(b)(i)(C)(i) [Goubin], 6.3 through 6.9, 7.1(b), (c) and (d), 7.1(f)(ii) and (vii), 7.2(c) and (e), 7.4, 7.5(a)(i), 7.5(b)(i), 7.5(c) and 14.19 [Tax Reserves Adjustment] of this Agreement and in Sections 3.5 and 4.4 of the Merck Employee Leasing Agreement shall give rise to special distributions or dividends (each, a “Special Dividend” and, together, the “Special Dividends”) which shall be calculated and credited to one or the other of the Members in accordance with the provisions of the relevant Sections. Each of the Special Dividends is creditable in respect of one or more Fiscal Years. For each Fiscal Year in respect of which one or more Special Dividends is to be credited, all the Special Dividends to be credited in respect of such year shall be

calculated and netted together in accordance with Section 6.2(b) and the resulting “Net Special Dividend” shall be paid in accordance with Section 6.2(c). A numerical example of the Net Special Dividend is provided in Exhibit XVIII hereto.

     (b)  Calculation of Net Special Dividend. Upon the earlier of (x) the approval by the Board of Directors of Merial’s consolidated financial statements for any Fiscal Year, and (y) the date that is one (1) month after the completion of the preparation of such financial statements by the management of Merial (it being understood that preparation of such financial statements shall be completed no later than the twentieth (20th) Business Day following the end of the Fiscal Year), but no later than sixty (60) days after the end of such Fiscal Year, Merial shall, and if Merial does not, each of the Principals may, promptly (based upon such financial statements and/or any other reasonably necessary or available financial information, which shall be made available to both Principals by Merial upon any request by either Principal), and in any case within twenty (20) Business Days of such earlier date, (such deadline being the “Special Dividend Calculation Date”) calculate each of the Special Dividends that is applicable in respect of such year. The “Net Special Dividend” for a particular Fiscal Year shall be the single payment payable to either the RP Member or the Merck Member that results from the netting of all such Special Dividends, which shall be calculated by taking the difference between the sum of all the Special Dividends, if any, creditable to one of the Members in respect of such year and the sum of all those, if any, creditable to the other Member in respect of such year. The Net Special Dividend shall be calculated in U.S. dollars, using, as necessary, the exchange rate of the last day of the Fiscal Year, except as otherwise provided in this Agreement. The Net Special Dividend shall be payable to the Member to which the greater dollar aggregate amount of Special Dividends in respect of such year is payable. Notwithstanding Article XVIII, any disagreements between the Principals as to the calculation of any of the Special Dividends or of the Net Special Dividend shall be resolved exclusively pursuant to Section 6.2(d), but without modifying or limiting other rights or remedies of the Parties under other provisions of this Agreement.

     (c)  Payment of the Net Special Dividend. The Net Special Dividend in respect of any Fiscal Year shall be paid by Merial out of Distributable Profits in the form of a preferential dividend. No other dividends or distributions to the Members shall be paid or declared by Merial until the entirety of any outstanding Net Special Dividend has been paid in full. If the Net Special Dividend to be paid in respect of any year is greater than the Distributable Profits available for distribution at the time dividends are to be paid in respect of such year, then the Net Special Dividend shall be paid to the appropriate Member to the extent of the available Distributable Profits (with the result that no other dividends shall be paid in respect of such year), and the unpaid balance shall be increased by an amount equal to interest calculated at a rate equal to the [*] accruing from April 15 of the year next following the year in question until such time as it is paid in full. In the event a Principal wishes to receive payment of the Net Special Dividend in a currency different from the U.S. Dollar, such Principal shall so notify Merial in writing sixty (60) days in advance of the payment date of the Net Special Dividend, and Merial shall convert the Net Special Dividend to the desired payment currency on the actual date of payment (at the then spot exchange rate). In the event of a dispute between the Principals as to the calculation of any Special Dividend or of the Net Special Dividend in respect of any year, the Principals shall follow the procedure described in 6.2(d) and, when the dispute is resolved, the Net Special Dividend will, together with the corresponding amount calculated as interest mentioned above, to the extent of available Distributable Profits, be paid through a partial Net Special Dividend payment. In the event any unpaid balance of a Net Special Dividend payable with respect to any year remains at the time the Net Special Dividend to be paid in respect of the following year is payable, such Net Special Dividend in respect of the following year shall be equal to the amount resulting from netting (or adding, as appropriate) such unpaid balance (and any accrued amount calculated as interest thereon) with the Net Special Dividend calculated for such following year in accordance with Section 6.2(b). Any undisputed amount in the calculation of the Net Special Dividend will be paid immediately, and any disputed amount shall be subject to the Special Dividend Calculation Dispute Resolution described in Section 6.2(d) below.

     (d)  Special Dividend Calculation Dispute Resolution. In the event there is any dispute between the Principals as to the calculation of any Special Dividend or of the Net Special Dividend in respect of any year, the Principals shall meet and negotiate in good faith to resolve such dispute. If the dispute has not been resolved within thirty (30) days of the Special Dividend Calculation Date, then either Principal may submit such dispute to arbitration as set forth below in this Section 6.2(d). In connection with any such dispute, a “Big Six” accounting firm acceptable to both the Principals shall be engaged to resolve the dispute, except that (i) if the Principals cannot reach agreement on the selection of such accounting firm, then such accounting firm shall be selected and appointed by the ICE (which selection and appointment shall be final and binding on the Parties), and (ii) the firm so selected and appointed may not be the primary accounting firm for Merck, Merial, RM or RP. Each of the Principals shall submit to the accounting firm selected their detailed calculations and such firm shall promptly be provided with any relevant financial data of the Merial Venture or of either of the Principals that it may request. In making its determination, the accounting firm shall refer to the methods of calculation set forth in this Article VI and to the numerical examples for calculating each of the Special Dividends and the Net Special Dividend set forth in Exhibit XVIII. The accounting firm shall be jointly requested to make its decision within thirty (30) days of having been selected. The decision of the accounting firm selected by the Principals or the ICE shall be final and binding on the Parties on any issue relating to the calculation of any Special Dividend or of the Net Special Dividend. The fees and reasonable expenses of the accounting firm shall be borne by the losing party; if the dispute is not resolved solely in favor of one party, then the parties shall share such fees and reasonable expenses equally. Pending such decision of the accounting firm, Merial, the Members and the Board of Directors shall continue to fulfill all their obligations under applicable Laws and this Agreement, including attending required meetings. In the event the Annual Member’s Meeting is held in accordance with Section 4.2(k) prior to such decision of the accounting firm, the Members’ Meeting shall only declare dividends in respect of the relevant year to the extent that the Distributable Profits remaining after the payment of such dividends would be sufficient to pay the greater of the Net Special Dividends claimed by the Principals under this Section 6.2(d), it being understood that in any such case the Net Special Dividend decided upon by the accounting firm (together with an

amount calculated as interest thereon calculated in accordance with Section 6.2(c)) shall be declared by the first Members’ Meeting following such decision and paid as a partial Net Special Dividend.

SECTION 6.3. Retroactive Closing Mechanism

     (a) The Parties shall give effect to a closing adjustment mechanism (the “Retroactive Closing Mechanism”) pursuant to this Section 6.3 with the intention of putting the Principals, to the extent possible, in the same economic position they would have been in had the Closing occurred on the Economic Effective Date (as defined below). For the avoidance of doubt, as between the Parties, the actual commencement of the Merial Venture for accounting and Tax purposes shall be the first day following the Closing Date. The Retroactive Closing Mechanism shall not be applied if a change in Tax Laws occurring between the date hereof and the date of the Closing causes the application of the Retroactive Closing Mechanism to have an adverse Tax consequence of [*] for either Principal. “Economic Effective Date” shall be April 1, 1997. “The Retroactive Period” shall be the period between the Economic Effective Date and the Closing Date.

     (b) The Retroactive Closing Mechanism shall be implemented through a Retroactive Closing Special Dividend, which shall be calculated based on the Retroactive Closing Financial Statements, as defined in, and prepared in accordance with, the instructions set forth in Exhibit XIX. Subject to the instructions set forth in Exhibit XIX, the Retroactive Closing Special Dividend shall be credited, in calculating the Net Special Dividend in respect of Fiscal Year 1997, to the Member whose pro forma cash generated (used), as calculated in accordance with the instructions set forth in Exhibit XIX, is lower than its share in the pro forma cash generated (used) by the Merial Venture during the Retroactive Period.

     (c)  Pre-Closing Preparation of Financial Statements . Each of Merck and RM hereby represents to the other as of the date hereof and as of the Closing Date that (i) each of the monthly actual and pro forma consolidated income statements and

consolidated statements of cash flows that it has provided to the other in respect of the operations of the Merck Contributed Business and of RM and its Subsidiaries, respectively, for the first quarter of Fiscal Year 1997 and for each calendar month since and including April 1997, and (ii) each of the quarterly actual and pro forma consolidated balance sheets that it has provided to the other in respect of the Merck Contributed Business and of RM and its Subsidiaries, respectively, since and including the consolidated balance sheets as of March 31, 1997, was prepared, (x) with respect to the actual consolidated income statements and consolidated statements of cash flows referred to above, consistently with the Merck Contributed Business Financials attached as Exhibit XVI hereto in the case of Merck, and the RM Financials attached as Exhibit XVII hereto in the case of RM, and (y) with respect to the pro forma consolidated income statements and consolidated statements of cash flows referred to above, consistently with the instructions set forth in Exhibit XIX; and each of Merck and RM hereby agrees to continue to provide such statements to the other, prepared in a consistent manner, for each calendar month and as of the end of each calendar quarter, as the case may be, until the Closing.

SECTION 6.4. Early Year Adjustment

     If the actual Net Reported Sales by the Merial Venture (or by RM and Merck and their respective Subsidiaries during the Retroactive Period) of certain products specified below in any of 1997, 1998 or 1999 are less than the assumed Baseline Net Reported Sales amounts for such products set forth below, the Principals will give effect in each such year to an adjustment mechanism (the “Early Year Adjustment Mechanism”) set forth in this Section 6.4. A numerical example of the Early Year Adjustment Mechanism is provided in Exhibit XVIII hereto.

     (a)  Early Year Adjustment Special Dividend. The Early Year Adjustment Mechanism Entitlements of each Principal, if any, calculated pursuant to this Section 6.4 in respect of each Fiscal Year 1997 through 1999 shall be offset against each other, with the difference between them being the “Early Year Adjustment Special Dividend” for each such Fiscal Year. In calculating the Net Special Dividend in respect of each such

Fiscal Year, the Early Year Adjustment Special Dividend shall be credited to the Merck Member if the Merck Section 6.4 Entitlement (as defined below) is greater or to the RP Member if the RP Section 6.4 Entitlement (as defined below) is greater.

Baseline Net Reported Sales ($ millions)

Gross Margin Rate (%)

     (b)  Merck Section 6.4 Entitlement. The amount, if any, by which (x) the sum of actual Net Reported Sales of Biological Products and Fipronil Products (together, “RP Adjustment Products”), for any of 1997, 1998 or 1999, are less than (y) the respective Baseline Net Reported Sales for RP Adjustment Products for such year, shall be the “RP Sales Shortfall Amount” for such year. Merck shall be entitled in respect of any such year to a dollar amount (the “Merck Section 6.4 Entitlement”) equal to the product of (xx) the RP Sales Shortfall Amount, (yy) the percentage equal to the Gross Margin Rate set forth above for RP Adjustment Products for such year, and (zz) [*].

     (c)  RP Section 6.4 Entitlement. The amount, if any, by which (x) actual Net Reported Sales of Avermectin Products (“Merck Adjustment Products”), for any of 1997, 1998 or 1999, are less than (y) the respective Baseline Net Reported Sales for Merck Adjustment Products for such year, shall be called the “Merck Sales Shortfall Amount” for such year. RP shall be entitled in respect of any such year to a dollar amount (the “RP Section 6.4 Entitlement”) equal to the product of (xx) the Merck Sales Shortfall Amount, (yy) the percentage equal to the Gross Margin Rate set forth above for Merck

Adjustment Products for such year, and (zz) [*].

     (d)  1997 Partial Year. In calculating the Sales Shortfall Amounts, if any, in respect of 1997, the relevant Baseline Net Reported Sales amounts for the full Fiscal Year shall be reduced proportionately (i.e., multiplied by a fraction the numerator of which is the actual Net Reported Sales amount during the period from the Economic Effective Date to the end of 1997 and the denominator of which is actual Net Reported Sales amount for the full calendar year 1997) and compared to actual Net Reported Sales during the period from the Economic Effective Date to the end of 1997.

     (e)  Foreign Currency Fluctuation. In order to eliminate the effects of certain foreign currency fluctuations, the Net Reported Sales calculated with respect to all sales of RP Adjustment Products or Merck Adjustment Products denominated in any of the currencies listed hereafter shall be translated into U.S. dollars on the basis of the following exchange rates: English pound sterling .63, French franc 5.00, German deutschemark 1.43, Italian lira 1624, Spanish peseta 125, Japanese yen 93, and Australian dollar 1.35. If any of such sales of RP Adjustment Products or Merck Adjustment Products in one of such countries are denominated in ecus or euros, the Net Reported Sales in U.S. dollars with respect to such sales shall be determined by first translating the amount in ecus or euros, as the case may be, into an amount denominated in the national currency of such country (the English pound sterling, French franc, German deutschemark, Italian lira or Spanish peseta, as the case may be) at the exchange rate in effect at the date of such sale (or, if the national currency no longer exists at such time, the last such exchange rate in effect prior to the elimination of the national currency), and then translating the resulting national currency amount into U.S. dollars at the exchange rates set forth above.

     (f)  Early Dissolution. The Early Year Adjustment Mechanism shall only be applied to full calendar years (and to the partial 1997 year as contemplated in Section 6.4(d)). In the event the Merial Venture is Dissolved prior to December 31, 1999, the Principals shall negotiate in good faith at such time in order to adjust the payment(s)

made in connection with such Dissolution to account for the estimated present value of the adjustments that would have been made pursuant to the Early Year Adjustment Mechanism set forth in this Section 6.4 had such Dissolution not occurred. In the event such Dissolution occurs pursuant to the purchase by one Principal of the Merial Venture interest of the other, the adjustment shall be made to the purchase price. In the event such Dissolution occurs pursuant to the purchase by a Third Party of all or substantially all of the Merial Venture, the adjustment shall be made to the apportionment of the purchase price between the Principals (which apportionment would otherwise be 50/50, before accounting for any undistributed Special Dividends or other early Dissolution adjustments).

     (g)  Change of Early Year Adjustment Mechanism Premises. If, prior to the Closing, the Principals or, after the Closing, Merial’s Board of Directors, approves a transaction or the development and marketing of a product that can be reasonably viewed as changing the premises upon which the Baseline Net Reported Sales amounts were agreed, then Merck and RP shall negotiate in good faith to determine appropriate and equitable modifications to the Baseline Net Reported Sales amounts and until both Principals agree on such modifications, the foregoing provisions of this Section 6.4 shall continue to apply.

SECTION 6.5. Band Adjustment

     If the average annual actual Net Reported Sales of RP Adjustment Products or Merck Adjustment Products by the Merial Venture during the four calendar-year period of 1998, 1999, 2000 and 2001 is more than [*] the Baseline Net Reported Sales for such products set forth in this Section 6.5, the Parties will give effect to a band adjustment mechanism (the “Band Adjustment Mechanism”) set forth in this Section 6.5. A numerical example of the Band Adjustment Mechanism is provided in Exhibit XVIII hereto.

     (a)  Band Adjustment Special Dividend. The Band Adjustment Mechanism Entitlements of each Principal, if any, as calculated pursuant to this Section 6.5, shall be

offset against each other, with the difference between them being the “Band Adjustment Special Dividend”. The Band Adjustment Special Dividend shall be credited to the RP Member if the RP Section 6.5 Entitlement, as defined below, is greater than the Merck Section 6.5 Entitlement, as defined below, or to the Merck Member if the Merck Section 6.5 Entitlement is greater than the RP Section 6.5 Entitlement, in calculating the Net Special Dividend in respect of Fiscal Year 2001.

      Baseline Net Reported Sales ($ millions)

     (b)  Merck Section 6.5 Entitlement. The amount, if any, by which (x) the average of the actual annual Net Reported Sales for RP Adjustment Products, during the period 1998-2001 inclusive, is less than (y) the average of the annual Baseline Net Reported Sales for RP Adjustment Products, during such period, shall be the “Average RP Sales Shortfall Amount”. If the Average RP Sales Shortfall Amount is greater than [*] (the “RP Threshold”), then Merck shall be entitled to an amount (the “Merck Section 6.5 Entitlement”) [*]. The RP Threshold was calculated [*].

     (c)  RP Section 6.5 Entitlement. The amount, if any, by which (x) the average of the actual annual Net Reported Sales for Merck Adjustment Products, during the period 1998-2001 inclusive, is less than (y) the average of the annual Baseline Net Reported Sales for Merck Adjustment Products during such period, shall be the “Average Merck Sales Shortfall Amount”. If the Average Merck Sales Shortfall Amount is greater than [*] (the “Merck Threshold”), then RP shall be entitled to an amount (the “RP Section 6.5 Entitlement”) [*]. The Merck Threshold was calculated [*]

[*].

     (d)  Foreign Currency Fluctuation. In order to eliminate effects of certain foreign currency fluctuations, actual Net Reported Sales (with respect to sales made in certain currencies other than U.S. dollars) shall be calculated using the same agreed upon exchange rates as for the Early Year Adjustment Mechanism, as set forth in Section 6.4(e) above.

     (e)  Early Dissolution. If the Merial Venture liquidates, sells or otherwise disposes of all or substantially all of its assets or is Dissolved prior to January 1, 2002, then the Band Adjustment Mechanism shall be applied as follows:

     (i) if the Dissolution Date is prior to January 1, 1999, the Band Adjustment Mechanism shall not apply;

     (ii) in the case of a Dissolution Date on or after January 1, 1999, the Band Adjustment Mechanism shall be applied as set forth in Section 6.5(a)-(d) above, except as follows:

     The Average RP Sales Shortfall Amount and the Average Merck Sales Shortfall Amount shall be calculated on an annualized basis, based on the number of full calendar quarters from January 1, 1998 through the Dissolution Date, rather than on the average of the four full calendar years of actual Net Reported Sales. The Baseline Net Reported Sales used for the quarters comprising any partial year prior to the Dissolution Date shall equal the product of the Baseline Net Reported Sales for such year and a fraction, the numerator of which is the Net Reported Sales for the relevant products shown (or implicit) in the Approved Budget (as defined below) for the full calendar quarters in such year prior to the Dissolution Date, and the denominator of which is the Net Reported Sales for such Products shown (or implicit) in the Approved Budget for the full year in which the Dissolution occurs. “Approved Budget” means the latest business plan or budget

which covers the year in question that has been approved by Merial’s Board of Directors (or, if no such plan or budget has been so approved, then the actual Net Reported Sales for the relevant products during the corresponding periods in the preceding calendar year shall be used in place of the Net Reported Sales shown in the Approved Budget for purposes of the calculation described in the preceding sentence).

     (f)  Change of Band Adjustment Mechanism Premises. If, prior to the Closing, the Principals or, after the Closing, Merial’s Board of Directors, approve a transaction or the development and marketing of a product that can be reasonably viewed as changing the premises upon which the Baseline Net Reported Sales amounts were agreed, then Merck and RP shall negotiate in good faith to determine appropriate and equitable modifications to the Baseline Net Reported Sales amounts and until both Principals agree upon such modifications, the foregoing provisions of this Section 6.5 shall continue to apply.

SECTION 6.6. Special Poultry Genetics Profit Allocation

     (a) Merial shall, in respect of each Fiscal Year from 1997 to 2001 inclusive, credit a Special Dividend (the “PG Profit Special Dividend”) to the Merck Member equal to [*] of the “Adjusted Poultry Genetics Profits” for such year. The “Adjusted Poultry Genetics Profits” for each such year shall be calculated by taking the pre-tax profits before interest expenses of the Poultry Genetics Business reflected in the stand alone pro forma financial statements referred to below in this Section 6.6(a) for the relevant Fiscal Year, [*]. The Parties acknowledge (i) that the PG Profit Special Dividend shall be calculated and credited regardless of the proportion of the Poultry Genetics Business’ profits that Merial actually receives in the form of dividends in respect of such year, and (ii) that all dividends actually received by Merial from its Poultry Genetics Business shall be allocated as between the Members as otherwise provided in this Agreement. The Parties agree that the impact of any acquisitions by Merial in the Poultry Genetics Business after

the Closing Date, which impact shall be determined by the management of Merial at the time of such acquisitions, shall be excluded from the calculation of the PG Profit Special Dividend. In the event of a divestiture by Merial or any other Merial Venture Company of a part (but less than all or substantially all) of the Poultry Genetics Business contributed to the Merial Venture (other than Goubin) between the Economic Effective Date and December 31, 2001, the Special Poultry Genetics Profit Allocation in respect of the Fiscal Year during which such divestiture occurred shall be increased by an amount equal to [*]. Merial shall prepare stand-alone pro forma financial statements reflecting the operations of the entirety of its Poultry Genetics Business for each Fiscal Year from 1997 through 2001 inclusive, including profit and loss statements, prepared consistently with the accounting principles and practices used to prepare the Merial financial statements (but excluding any financial or interest charges actually incurred by the Poultry Genetics Business). In preparing these financial statements, any expenses for overheads or corporate services shall be allocated on a fair and equitable basis, based on the actual use of corporate resources. These financial statements for the Fiscal Year 1997 shall reflect the operations of the Poultry Genetics Business from the Closing Date to December 31, 1997. The PG Profit Special Dividend in respect of 1997 shall be based on the profits of the Poultry Genetics Business during the period from the Closing Date to December 31, 1997. A numerical example of the Poultry Genetics Special Dividend is provided in Exhibit XVIII hereto.

     (b)  Deemed Interest Expense. For the purposes of calculating the Adjusted Poultry Genetics Profits, [*] of Debt shall be deemed to have been initially allocated to the Poultry Genetics Business. The “Deemed Interest Expense” for each year from 1997 through 2001 shall equal [*]

[*]. For the calculation of the 1997 Deemed Interest Expense, [*] shall be used.

     (c)  PG Profit Special Dividend. Subject to Section 6.6(d), the PG Profit Special Dividend calculated in respect of each Fiscal Year from 1997 to 2001 inclusive shall be credited to the Merck Member in calculating the Net Special Dividend pursuant to Section 6.2 in respect of such Fiscal Year.

     (d)  Early Disposal or Dissolution. If the Merial Venture liquidates, sells or otherwise disposes of all or substantially all of its Poultry Genetics Business or if the Merial Venture is Dissolved prior to January 1, 2002, then the Principals shall negotiate in good faith at such time, in order to adjust the payment(s) made in connection with such disposal or Dissolution to account for the estimated present value of the remaining PG Profit Special Allocation (the “PG Profit Allocation Present Value”). In the event the Principals are not able to agree within 30 days of the closing of such disposal or Dissolution on the amount of the PG Profit Allocation Present Value, it shall be determined in accordance with the procedures set forth in Section 17.2(g)(ii). In the event of an early sale or other disposition by the Merial Venture of all or substantially all of its Poultry Genetics Business, Merial shall, pursuant to Section 6.2, credit the PG Profit Allocation Present Value to the Merck Member as a Special Dividend in respect of the calendar year during which such sale was completed. In the event of a Dissolution of the Merial Venture pursuant to the sale by one Principal of its Merial Venture Interest to the other, the purchase price shall be increased (in the case of a sale to RP) or decreased (in the case of a sale to Merck), as appropriate, by the PG Profit Allocation Present Value (on a dollar for dollar basis). In the event of a Dissolution of the Merial Venture pursuant to the sale of all or substantially all of the Merial Venture to a Third Party, the apportionment of the sales proceeds to the Merck Member (which apportionment as between the Members would otherwise be 50/50, before accounting for any undistributed Special Dividends or other adjustments provided for in this Article VI) shall be increased on a dollar for dollar basis equal to the PG Profit Allocation Present Value.

SECTION 6.7. Supply Price Adjustments

     (a)  Merck Supply Price Adjustment. In respect of each Fiscal Year, the RP Member shall have an entitlement (the “RP Section 6.7 Entitlement”) equal to the product of (i) [*], and (ii) (x) the sum of all amounts accrued by the Merial Venture to the Merck Group for such Fiscal Year for the supply of products (or bulk) pursuant to the Merck Supply Agreement, and (without duplication) of all amounts paid by Merial or its Subsidiaries during such Fiscal Year to purchase the Inventories included in the Merck Contributed Non-U.S. Assets and the Retained Inventory, if any, less (y) the sum of (AA) all amounts that would have been so accrued with respect to such Fiscal Year if calculated in accordance with the Merck Manufacturing Supply Price Formula and (BB) the Avermectin Products Sales Adjustment for such Fiscal Year calculated in accordance with Exhibit XXI [Avermectin Products Sales Adjustment], but only if the amount (the “Delta”) equal to the amount determined pursuant to clause (x) above less the amount determined pursuant to clause (y) above, is a positive amount. The sum of the amounts specified in (AA) and (BB) shall be the “Merck Negotiated Supply Price”. If the Delta is a negative number, then in respect of such Fiscal Year (whether or not the Merck Supply Agreement is then in effect), the Merck Member shall have an entitlement (the “Merck Section 6.7(a) Entitlement”) equal to the product of (i) [*], and (ii) the absolute amount of the Delta. Merck hereby represents that the formula for calculating standard direct cost in the Merck Supply Agreement is on the same basis as the formula used to calculate standard direct cost in the Merck Base Case and the multiple of standard direct cost in the Merck Base Case roughly approximates (on average over the five years following the Closing Date given the product mix included in the Merck Base Case) the multiple of standard direct cost provided for in the Merck Manufacturing Supply Price Formula.

     (b)  RP Supply Price Adjustment. In respect of each Fiscal Year, the Merck Member shall have an entitlement (the “Merck Section 6.7(b) Entitlement”) equal to the product of (i) [*], and (ii) (x) the sum of all amounts accrued by the Merial Venture to the RP Group for such Fiscal Year for the

supply of products (or bulk) pursuant to the RP Ag Supply Agreement, less (y) the sum of all amounts that would have been so accrued if calculated at Fully Allocated Cost (as defined in the RP Ag Manufacturing Supply Price Formula). RP hereby represents that the purchase price for Fipronil used in preparing the projections set forth in the RM Base Case was calculated using Fully Allocated Cost (as defined in the RP Ag Manufacturing Supply Price Formula).

     (c)  Supply Price Adjustment Special Dividend. The “Supply Price Adjustment Special Dividend” shall be equal to the difference between the respective Entitlements of the Principals, if any, in respect of each relevant Fiscal Year, as calculated pursuant to Sections 6.7(a) and (b) above. The Supply Price Adjustment Special Dividend shall be credited to the RP Member if the RP Section 6.7 Entitlement is greater than the Merck Section 6.7(a) Entitlement plus the Merck Section 6.7(b) Entitlement or to the Merck Member if the Merck Section 6.7(a) Entitlement plus the Merck Section 6.7(b) Entitlement is greater than the RP Section 6.7 Entitlement, in calculating the Net Special Dividend in respect of such year pursuant to Section 6.2. A numerical example of the Supply Price Adjustment is provided in Exhibit XVIII hereto.

     (d)  Alternative Upon Dissolution, Sale, Etc. In the event that, as a result of any Dissolution, any transaction contemplated by Articles XVI or XVII or otherwise, this Section 6.7 is no longer operative or no longer effectively gives effect to the economic principle that on a net basis Merck is selling and the Merial Venture is purchasing Avermectin Products at the Merck Manufacturing Supply Price Formula and Merck receives amounts calculated pursuant to the Avermectin Products Sales Adjustment Exhibit, the Parties agree that, prior to the effectiveness of any such event, alternative arrangements shall be entered into by and among the Parties and/or a purchaser in order to provide the equivalent economic benefits to the Parties of the arrangements contemplated by this Section 6.7 that, in the aggregate, have no less favorable economic, tax, commercial and legal characteristics to each of the Parties.

SECTION 6.8 Contributed Debt Adjustment Special Dividend

     (a) From the Closing Balance Sheets, the Parties shall calculate the “RM Actual Contributed Net Debt Variance”, as defined below, and the “Merck Actual Contributed Net Debt Variance”, as defined below. The difference between the RM Actual Contributed Net Debt Variance and the Merck Actual Contributed Net Debt Variance, calculated as set forth below, shall be the “Contributed Debt Adjustment Special Dividend”. In calculating the Net Special Dividend in respect of the 1997 Fiscal Year pursuant to Section 6.2, the Contributed Debt Adjustment Special Dividend shall be credited to the RP Member if the Merck Actual Contributed Net Debt Variance is greater than the RM Actual Contributed Net Debt Variance, and to the Merck Member if the RM Actual Contributed Net Debt Variance is greater than the Merck Actual Contributed Net Debt Variance. A numerical example of the Contributed Debt Adjustment Special Dividend is provided in Exhibit XVIII hereto.

     (b)  The “RM Actual Contributed Net Debt Variance” shall be equal to :

     the RM Intercompany Debt (as defined in Section 5.2(b)),

plus

     the RM Outstanding Debt (as defined in Section 5.2(b)),

plus

     the RM Accrued Tax Liabilities (as defined in Section 5.2(b)),

plus

     the RM China Financial Receivable (as defined in Section 5.1(b)(ii)),

plus

     the RP Chinese Assets Value Shortfall (as defined in Section 5.1(b)(ii)),

less

     the RM Closing Cash (as defined in Section 5.2(b)),

less

     [*]

     (c)  The “Merck Actual Contributed Net Debt Variance” shall be equal to :

     the Merck Non-U.S. Net Assets Value (as defined in Section 5.1(a)(ii)(A)),

plus

     the Retained Receivables (as defined in Section 5.1(a)(ii)(C)),

plus

     the Retained Inventories (as defined in Section 5.1(a)(ii)(C)),

plus

     the Merck Accrued Tax Liabilities (as defined in Section 5.1(a)(ii)(B)),

plus

     the Merck Other Debt (as defined in Section 5.1(a)(ii)(B)),

less

     the Merck Cash Contribution Amount (as defined in Section 5.1(a)(ii)(B)),

less

     the Merck Closing Cash (as defined in Section 5.1(a)(ii)(B)),

less

     [*].

     (d) The Contributed Debt Adjustment Special Dividend shall equal the difference between the RM Actual Contributed Net Debt Variance and the Merck Actual Contributed Net Debt Variance, which difference shall be calculated taking into account any negative amounts (for example, if one amount is -4 (negative four) and the other is 4, the difference between them shall be 8).

SECTION 6.9. Delayed Purchase Assets and Liabilities Special Dividend

     The Parties shall agree on the estimated aggregate fair market value of the Delayed Purchase Assets, such estimated value being the “Estimated Delayed Purchase Assets Value”. For purposes of this Section 6.9, the amount in U.S. dollars to be used in calculating any purchase price for Delayed Purchase Assets denominated in a currency other than U.S. dollars shall be calculated using the closing midpoint exchange rate set forth in the London edition of the Financial Times on the date the payment is made.

     (a)  Purchases of Delayed Purchase Assets during the 1997 Fiscal Year . As soon as practicable after the end of the 1997 Fiscal Year, and in no event later than the

twentieth (20th) Business Day following the end of such Fiscal Year, Merial shall (i) determine whether all the Delayed Purchase Assets have been purchased during the 1997 Fiscal Year, and (ii) calculate the difference between (x) the Estimated Delayed Purchase Assets Value and (y) the purchase price actually paid for all the Delayed Purchase Assets purchased during the 1997 Fiscal Year (the “1997 Aggregate Purchase Price”), which difference shall be the “1997 Delayed Purchase Assets Variance”.

(A) If the 1997 Aggregate Purchase Price is greater than the Estimated Delayed Purchase Assets Value, the 1997 Delayed Purchase Assets Variance shall be credited as a 1997 Delayed Purchase Assets Special Dividend to the RP Member, pursuant to Section 6.2 and in respect of the 1997 Fiscal Year.

(B) If the purchase of all Delayed Purchase Assets is completed by December 31, 1997 and the Estimated Delayed Purchase Assets Value is greater than the 1997 Aggregate Purchase Price, the 1997 Delayed Purchase Assets Variance shall be credited as a 1997 Delayed Purchase Assets Special Dividend to the Merck Member pursuant to Section 6.2 and in respect of the 1997 Fiscal Year.

(C) If the purchase of all Delayed Purchase Assets is not completed by December 31, 1997 and the 1997 Aggregate Purchase Price is lower than the Estimated Delayed Purchase Assets Value, no Delayed Purchase Assets Special Dividend shall be credited with respect to the 1997 Fiscal Year.

     (b)  Purchases during 1998 . As soon as practicable after the end of the 1998 Fiscal Year, and in no event later than the twentieth (20th) Business Day following the end of such Fiscal Year, Merial shall (i) determine whether all the remaining Delayed Purchase Assets have been purchased during the 1998 Fiscal Year, and (ii) calculate the difference between (x) the Estimated Delayed Purchase Assets Value and (y) the purchase price actually paid for all the Delayed Purchase Assets purchased during the 1997 and the

1998 Fiscal Years (the “Global Purchase Price”), which difference shall be the “Global Delayed Purchase Assets Variance”.

(A) If the purchase of all Delayed Purchase Assets is completed by December 31, 1998 and the Global Purchase Price is greater than the Estimated Delayed Purchase Assets Value, a Delayed Purchase Assets Special Dividend equal to the difference between the Global Delayed Purchase Assets Variance and the 1997 Delayed Purchase Assets Special Dividend credited to the RP Member and specified in Section 6.9(a)(A) shall be credited to the RP Member, pursuant to Section 6.2 and in respect of the 1998 Fiscal Year. If the purchase of all Delayed Purchase Assets is completed by December 31, 1998 and the Global Purchase Price is lower than the Estimated Delayed Purchase Assets Value, a Delayed Purchase Assets Special Dividend equal to the difference between the Global Delayed Purchase Assets Variance and the 1997 Delayed Purchase Assets Special Dividend credited to the Merck Member and specified in Section 6.9(a)(B) shall be credited to the Merck Member, pursuant to Section 6.2 and in respect of the 1998 Fiscal Year.

(B) If the purchase of all Delayed Purchase Assets is not completed by December 31, 1998, the Parties shall meet no later then the twentieth (20th) Business Day of the 1999 Fiscal Year to determine the consequences, financial and otherwise, of such a failure, and such consequences shall be taken into account to determine the 1998 Delayed Purchase Assets Special Dividend.

SECTION 6.10. Early Dissolution and the Merck Research Payment

     No RM Funding Commitment payments (as defined in the Merck Research Agreement) shall be made by RM SAS after the Dissolution of the Merial Venture; provided , however , that if the Merial Venture is Dissolved before December 31, 2003, the payment(s) made in connection with such Dissolution to the Merck Member shall be

increased (or to the RP Member shall be decreased) by an amount equal to the present value of future RM Funding Commitment payments (the “Research Payment Present Value”), which shall be deemed to be [*] for a Dissolution during the calendar year 1997, and [*]. In the event of a Dissolution of the Merial Venture pursuant to the sale by one Principal of its Merial Venture Interest to the other, the purchase price shall be increased or decreased, as appropriate, by the Research Payment Present Value (on a dollar for dollar basis). In the event of a Dissolution of the Merial Venture pursuant to the sale of all or substantially all of the Merial Venture to a Third Party, the apportionment of the sales proceeds to the Merck Member (which apportionment as between the Members would otherwise be 50/50, before accounting for any undistributed Special Dividends or other adjustments provided for in this Article VI) shall be increased on a dollar for dollar basis equal to the Research Payment Present Value.

SECTION 6.11. Distribution Upon Liquidation

     In any liquidation of the Merial Venture, the assets of the Merial Venture shall, subject to applicable Laws, be distributed in accordance with the following priorities:

(i) First, to the creditors of the Merial Venture (including to any RP Companies or Merck Companies to whom any Debt or accounts payable may be owed by the Merial Venture) in accordance with applicable Laws and any judgments or orders of competent Public Authorities;

(ii) second, to the extent of any assets remaining, if there is any unpaid Net Special Dividend balance outstanding in respect of any prior Fiscal Year, an amount equivalent to such balance to the Member to whom such unpaid Net Special Dividend balance is due (together with any interest accrued thereon);

(iii) third, to the extent of any assets remaining, each of the adjustments contemplated by Section 6.4(f) [Early Year Adjustment], 6.5(e) [Band Adjustment], 6.6(d) [Poultry Genetics] and 6.10 [Research Payments] shall be added or netted, as appropriate, and the resulting net adjustment amount paid to the Member entitled thereto; and

(iv) fourth, any remaining assets shall be distributed as between the Members and/or their Affiliates that hold the Preference Shares, if any, in the following order of priority: first, to the Members in an amount equal to the amount of any Net Special Dividend that would be calculated for the Member for the Fiscal Year in which the Dissolution of Merial occurs, treating such Fiscal Year as ending on the date of such Dissolution (to the extent not duplicative of (iii) above); second, in respect of any accumulated but unpaid dividends on the Preference Shares, to the holders thereof; third, in a return to the holders of the Preference Shares of capital equal to the nominal value of such shares, to the holders thereof; and fourth, equally as between the Members in respect of their general ownership interest in Merial.

ARTICLE VII

EMPLOYEES AND EMPLOYEE BENEFIT MATTERS

SECTION 7.1. Animal Health Division — U.S.

     (a)  Leasing of Merck Employees. The Merck Group employees employed in the Animal Health Business in the U.S. as of the Closing Date listed on a schedule to be provided by Merck on the Closing Date, which list shall include not only employees then actively employed but also those then on leave of absence, short-term disability, long-term disability and workers compensation (the “Merck Leased Employees”), shall be leased to Merial, or to a Merial Venture Company designated by Merial, as of the Closing Date pursuant to the terms set forth in the Merck Employee Leasing Agreement. Each Merck Leased Employee who is employed by Merck as of December 31, 1997 including not only employees then actively employed but also those then on leave of absence, short-term disability, long-term disability and workers compensation shall be offered employment with Merial, or a Merial Venture Company designated by Merial, as of January 1, 1998 at a rate of base salary determined by Merial and shall be eligible to participate in all employee benefit plans established and/or maintained by Merial or such Merial Venture Company, as the case may be. Notwithstanding the foregoing sentence, each Merck Leased Employee who has commenced, or is eligible to commence, benefits under the Merck & Co., Inc. Long-Term Disability Plan for Non-Union Employees (the “Merck LTD Plan”) prior to January 1, 1998 (a “Merck LTD Employee”) shall continue to receive medical, dental, life insurance and long-term disability benefits under the terms and conditions of the applicable Merck benefit plans, as each may be amended from time-to-time, and such continuation of benefits shall be at Merck’s sole cost and expense; provided , however , that the costs of benefits provided to a Merck Leased Employee who returns to work during the term of the Leasing Agreement or, thereafter, returns to work with the Merial Venture, shall be borne by Merial. Merck shall reimburse Merial (or the appropriate Merial Venture Company) for the cost of providing long-term disability benefits to each Merck Leased Employee who has commenced or is eligible to commence benefits under the Merck & Co., Inc. Short-Term Disability Plan for Non-Union

Employees prior to the Closing Date and becomes eligible to receive, on or after January 1, 1998, benefits under the Merial long-term disability plan as a result of such pre-Closing disability, provided such disability is continuous in accordance with the terms of the Merial long-term disability plan. Those Merck Leased Employees (including the Merck LTD Employees) who accept employment with Merial, or a Merial Venture Company designated by Merial, shall be referred to as the “Merial Merck Employees.”

     (b)  Grandfathered Merck Retirement Benefits. All Merial Merck Employees shall be 100% vested in the Retirement Plan for Salaried Employees of Merck & Co., Inc. (the “Qualified Plan”) and in the Merck & Co., Inc. Supplemental Retirement Plan, as each such plan may be amended from time to time, (together with the Qualified Plan, the “Merck Retirement Plans”) as of December 31, 1997. Each Merial Merck Employee, the sum of whose age plus years of credited service (within the meaning of the Qualified Plan) as of December 31, 1997 equals at least 60 (collectively, the “Grandfathered Merck Employees”) shall receive credit for his or her years of service with the Merial Venture for purposes of determining eligibility to receive a subsidized early retirement benefit with respect to his or her benefit accrued through December 31, 1997 under the Merck Retirement Plans. Unless required by law, benefits under the Merck Retirement Plans shall not commence until the Grandfathered Merck Employee terminates employment with the Merial Venture. The compensation that each Merial Merck Employee receives from the Merial Venture during the period from January 1, 1998 to December 31, 2007 will for purposes of determining his or her final average pay under the Merck Retirement Plans be treated as if it were compensation received from Merck. An accounting or actuarial firm mutually agreed upon by Merck and RP shall determine the present value of the benefits to be provided to Merial Merck Employees pursuant to this Section 7.1(b) that are in excess of the benefits they would otherwise be entitled to receive under the Merck Retirement Plans in the absence of this Section 7.1(b) (such excess amount shall be defined as the “Retirement Cost”). The Retirement Cost shall be determined as of December 31, 1997 using the December 31, 1997 demographics of Merial Merck Employees and shall be based upon the actuarial assumptions used by Merck for purposes of determining pension expense pursuant to Financial Accounting Standards (“FAS”) 87 for the Merck Retirement Plans for 1998. Merial shall credit to the Merck Member in

respect of the Fiscal Year in which the Retirement Cost is calculated a Special Dividend equal to the Retirement Cost (as increased by an amount calculated as interest at [*] from December 31, 1997 through the earlier of (x) the date on which the Net Special Dividend in respect of such Fiscal Year is paid in full, and (y) April 15 of the Fiscal Year immediately following the Fiscal Year in respect of which the Special Dividend is to be paid).

     (c)  Grandfathered Retiree Medical and Dental Benefits. Each Grandfathered Merck Employee whose employment with the Merial Venture terminates and who, at the time of such termination, (i) is at least 55 years old with at least 10 years of credited service (as defined under the Qualified Plan and including service with the Merial Venture) or (ii) if hired by Merck prior to January 1, 1989 is at least 65 years old or meets the requirements of the foregoing clause (i), shall be eligible to receive retiree medical benefits under the terms applicable to retirees under the Merck & Co., Inc. Medical Plan for Nonunion Employees as it may be amended from time to time (the “Merck Medical Plan”) and shall be eligible to receive retiree dental benefits under the terms applicable to retirees under the Merck & Co., Inc. Dental Plan for Nonunion Employees as it may be amended from time to time (the “Merck Dental Plan”). An accounting or actuarial firm mutually agreed upon by Merck and RP shall determine the present value of the accumulated post retirement benefit obligation existing for eligible Grandfathered Merck Employees (other than those employees who, as of December 31, 1997 (i) are at least 55 years old with at least 10 years of credited service (as defined under the Qualified Plan), or (ii) if hired by Merck prior to January 1, 1989 are at least 65 years old or meet the requirements of the immediately foregoing clause (i)) pursuant to this Section 7.1(c) (the “Health Cost”). The Health Cost shall be determined as of December 31, 1997 using the December 31, 1997 demographics of eligible Grandfathered Merck Employees and shall be based upon the actuarial assumptions used by Merck for calculating the expense for the Merck Medical Plan and the Merck Dental Plan pursuant to FAS 106 for 1998. Merial shall credit to the Merck Member in respect of the Fiscal Year in which the Health Cost is calculated a Special Dividend equal to the Health Cost (as increased by an amount calculated as interest at [*] from December 31, 1997 through the earlier of (x) the date on which the Net

Special Dividend in respect of the 1998 Fiscal Year is paid in full, and (y) April 15 of the Fiscal Year immediately following the Fiscal Year in respect of which the Special Dividend is to be paid).

     (d)  Merck Stock Options. In addition to any stock option grants made prior to the date of this Agreement under any Merck incentive stock plan (all such plans collectively, the “Merck Stock Option Plans”), Merck may make an additional grant under the current Merck Stock Option Plan to be priced as of the Closing Date to selected employees as determined by Merck who shall become Merck Leased Employees. Merck will provide the shares of Merck common stock obtained upon exercise of any stock option grants which have been made by Merck under the Merck Stock Option Plans to any Merial Merck Employee which are outstanding as of the Closing Date. Promptly after any such exercise, Merck may invoice on an employee by employee basis and, if so invoiced, Merial (or the appropriate Merial Venture Company) will pay to Merck (within fifteen (15) days after receipt of such invoice), the amount (the “Spread”) equal to the product of (A) the excess of (i) the per share market price of shares of Merck common stock purchased on the exercise of the option, over (ii) the per share exercise price of the stock option (adjusted for stock splits, stock dividends, reclassification and similar events between the date the stock option was granted and the exercise date, as considered appropriate by Merck), times (B) the number of shares issued upon such exercise. Merial shall credit to the RP Member in respect of any Fiscal Year in which it pays a Spread to Merck, a Special Dividend equal to the aggregate of (x) all Spreads paid in such Fiscal Year by Merial to Merck plus (y) any incidental costs associated with the payment of such Spreads and paid by the Merial Venture (i.e., any employer taxes paid). The Special Dividend (as described in the foregoing sentence) that may be credited to the RP Member in any particular Fiscal Year shall be increased by an amount calculated as interest at a rate equal to [*] accruing from December 31 of such Fiscal Year through the earlier of (x) the date on which the Net Special Dividend in respect of such Fiscal Year is paid in full, and (y) April 15 of the Fiscal Year immediately following the Fiscal Year in respect of which the Special Dividend is to be paid.

     (e)  RM Plans. Following the Closing and until December 31, 1997, Merial shall, or shall cause RM or its Subsidiaries to continue to, maintain the employee benefit plans that were in effect for the employees of RM or its Subsidiaries employed in the Animal Health Business in the U.S. (“RM U.S. Employees”) immediately prior to the Closing, other than any stock option plans (the “RM Plans”). Prior to January 1, 1998, such RM Plans shall only be amended (i) as required by law, (ii) to maintain the tax qualified status of any such plan or (iii) as determined by the Board of Directors; provided, however, that the RM/Select 401 (k) Plan (the “RM 401 (k) Plan”) shall be amended as of July 1, 1997 to provide an employer matching contribution of [*] each $1.00 deferred by a participant under the plan up to [*] of compensation.

     (f)  Merial Plans. Effective January 1, 1998, Merial shall, or shall cause the appropriate Merial Venture Company to, amend the RM Plans or otherwise establish such employee benefit plans in accordance with the terms set forth herein (other than a severance plan which shall be established as of the Closing Date) in which Merial Merck Employees and RM U.S. Employees (collectively the “U.S. Animal Health Employees”) shall participate as Merial shall deem appropriate subject to the terms and conditions set forth herein. It is the intention that such plans shall be initially designed so that the expected aggregate cost for the plans shall not, on an annualized basis, exceed the total combined aggregate benefit plan costs of RM and it